Trump tax reform analysis | KPMG | AU

Trump tax reform analysis: a global game-changer?

Trump tax reform analysis

In this report KPMG's Brendan Rynne, Partner, Chief Economist, and Grant Wardell-Johnson, Partner, Economics and Tax Centre, discuss the legislated tax reforms in the United States of America (U.S.), through the Conference Committee H.R.1 Bill, and explore why they are a global-game changer.

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Australian Dollar coin with US Dollar note

Global macroeconomic modelling by KPMG Economics suggests Australian GDP will be permanently reduced by 0.3 percent (or $5.1 billion in today’s dollars) in the medium term, equivalent to about 25,500 jobs, as a direct consequence of the U.S. tax reforms.

These are likely to be conservative estimates. Depending on how aggressively global firms, in particular U.S. firms, behave given the incentives contained in the legislated tax reforms, there is a real risk that our modelling has under-estimated the amount of capital that would otherwise have come to Australia will now get allocated to economic opportunities elsewhere.

Further insights

The remainder of this report briefly discusses:

  • the nature of the tax reforms enacted in the U.S. on 22 December 2017
  • the transmission mechanism by which domestic tax reform in the U.S. will impact Australia’s economy
  • estimates of what that impact will be and when
  • the incentives that are now in place for global firms as a consequence of these U.S. tax reforms; and 
  • how capital flows to Australia could be affected.

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