Would MNC’s treasurers be impacted by the huge US tax reform adopted?

This is a key question to address: could the recently voted tax reform in the US generate huge impacts on treasurers? It seems that a majority of CFO’s are convinced they will benefit from tax reform bill passed end of December 2017 in the USA. Will it boost employee hiring? Will it lead to salary increases? Will share buy-backs increase in the next months? Etc… We will wait and see… However President Trump defined his reform as a Xmas gift for middle-income people. At least, MNC’s will pay less corporate taxes. The repatriation of cash held abroad will also be taxed at a lower rate of 15.5%. It should enable companies to bring back home billion of USD piled up overseas. Therefore, it should also boost investments with lower corporate taxes (i.e. from 35% to 21%) and with expensing of capital spending. All-in it should boost the GDP too (expectations of 3% in 2018 and 2% in 2019, according to economists). Such a reform can also indirectly improve US industry productivity. In very short term, this faster-growing economy and steady increase of interest rates could push markets even higher and stocks should outperform bonds (despite current high levels of stock-exchanges). In our opinion, it should benefit first to the individuals and mainly to upper-income households. For sure, this tax revolution will impact the whole US economy positively. However, it remains extremely complicate and risky to predict all-in impacts and to assess the short and medium terms consequences it will have. We should not forget that this reform must be applied at a time all businesses are evolving and facing a further step into digitization. As always, we cannot determine the pure direct impact it will have as it has to be added to other major economic changes.

Fran?ois Masquelier, Chairman of ATEL