US Tax Reform Sees Repatriation Of Offshore Earnings

By Global Tax Weekly

The US tax reform legislation might not be perfect, as anyone grappling with the transition tax and the alphabet soup of acronyms and abbreviations, such as BEAT, GILTI, and FDII, would attest. But if the repatriation of the huge pile of stock and cash accumulated offshore by US corporations was a major goal of tax reform, then it appears to have worked. At least, that ‘s the conclusion to be drawn from the United Nation ‘s latest report on global foreign direct investment flows.

For the administration of President Donald Trump and the Republican lawmakers who pushed the Tax Cuts and Jobs Act through, these statistics must have seemed like a godsend. As James Zhan, Director of the Investment and Enterprise Division at the United Nations Conference on Trade and Development, observed the agency had said back in early January that there was “about USD2 trillion of stock in the form of cash or in the form of reinvested earnings of retained earnings outside the US,” which may be repatriated in some form, following wholesale tax reform. “And indeed, it’s happening,” he said. “We have seen that outward FDI from the US was from USD147bn last year to a negative USD247bn this year.”

Nevertheless, as Newton ‘s Third Law dictates, every action has an equal and opposite reaction. And as capital now appears to be pouring into America, it is pouring out of some of the world ‘s other major economies. Indeed, Zhan went as far as to describe the global FDI environment as “gloomy.” So you can take your pick of the antonyms available to describe the investment environment in the US. Bright? Optimistic? Upbeat? Sunny?

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