US tax changes prompt cash management overhaul
Changes to the US corporate tax code are aimed at driving more onshore investment. For treasurers, this will mean reassessing their current global cash management structures.
The US Senate pushed through a raft of changes to the corporate tax code last month, the most notable being the reduction of the corporate tax rate from 35% to 21%.
However, a series of exceptions and caveats makes the reforms more complex than they seem at first glance.
The possible benefits of the tax changes seem focused on the US government's goal to bring jobs back to the US. Although the reforms are forecast to cost the $1.3 trillion during the next decade, the hope is that economic growth will compensate for this.
Rama Variankaval, head of corporate finance advisory at JPMorgan, says these changes are the most important event to happen for corporates and capital markets in decades, but that everyone will view them differently.
“Broadly it is good, but every circumstance is different," he says. "For largely domestic companies it is good, as they will have the tax cut. But for US companies with large offshore businesses not paying significant US taxes today, it is obviously less good.”
The new rules are likely to see treasurers making some notable changes to how their cash management operations are run.