The Ways and Means Committee of the U.S. House of Representatives today released text and descriptions of a tax reform bill.
The Ways and Means Committee of the US House of Representatives today released the text and descriptions of a proposed tax reform bill.
The chairman of the House Ways and Means Committee, Kevin Brady, initiated the tax reform process with the release of a “Chairman’s mark” of the tax reform bill. The Chairman’s mark generally represents the Ways and Means Chairman’s - and by proxy, the committee staff’s - proposal for tax reform. It does not necessarily include the input and priorities of the full committee.
It is important to keep in mind that the road to tax reform is still a long one – as summarised in the diagram below. There remains considerable uncertainty surrounding the final shape of any reform measures which may be enacted.
The key component of the proposal is to reduce the US federal corporate tax rate from 35% to 20%.
Under the proposals, Irish parented groups with operations in the US could see significant changes in the measure of their US taxable profits. Measures of relevance include:
The combined effect of these measures, if enacted, could be significant for the supply chains of goods and services to the US market.
Additional measures of relevance to US parented multinational groups with operations in Ireland include:
What ultimately emerges and what it might mean to Ireland is difficult to say. The proposal to reduce the US federal corporate tax rate to 20% will, if implemented, undoubtedly reduce the difference between the US rate and Ireland’s corporate tax rate of 12.5%. However, adding State Taxes of circa 5%, would mean a US tax rate of double the Irish rate – so there would remain a compelling difference between the two.
The proposed one-time tax on overseas earnings is unlikely to have a significant impact on the Irish operations of US companies.
The measures above are only part of a US tax reform package which also proposes fundamental reform for the taxation of individuals and US domestic businesses. There are many variables which will continue to be debated by US taxpayers before the final shape of US tax reform is determined. As such, it will undoubtedly be very important for companies to monitor and assess the implications of what is ultimately agreed, as the proposals develop.
KPMG Ireland is hosting a webinar on Monday, 6 November 2017 at 5pm GMT to present an overview of the proposals and their potential impact on businesses based in Ireland.
If you have any questions relating to US tax reform, please do not hesitate to contact us.