Most observers believe the next US president will cut business tax rates as the gridlock in Congress is cleared. But this depends if the transition between the Obama and Trump administrations goes as harmoniously as promised, says Daniel Malachuk.

Eight years ago, newly inaugurated president Barack Obama famously told a young Republican congressman: “Elections have consequences and, at the end of the day, I won.” 

One likely consequence from this year’s election should be good news for direct investors. Most observers believe that business tax rates will be reduced substantially. 

For some time, the Republicans in the House and the Senate have been working on a major tax reform package. It had been stymied by the gridlock of divided government. The proposals in Congress adhere generally to the president-elect’s goals: lower tax rates, especially for businesses, and simplification and lower rates for all. 

A potential sticking point is whether to shift from a global to a territorial tax structure, similar to that used by most developed countries. How this shift squares with a desire to encourage domestic versus international investment by US companies may raise other issues. Look for many US-based global companies to be touting their overall US presence. 

In any event, given the prospects of vast new revenues from a substantial repatriation of global profits and the use of these revenues to fund major job-producing projects, public infrastructure and private business expansion, tax reform and rate reductions appear ripe for immediate action.

Mr Obama pledged his full cooperation and has undoubtedly instructed his staff to work toward a harmonious transition. Those sentiments are probably real. I remember a shared and genuine sense of duty among fellow White House staffers as we transitioned responsibilities to the 'other' party. 

But, just five days after the election, the “money people” on the Left held their own transition meetings. Their focus: how to derail the Trump agenda. Enacting business tax reduction may be an early test of this election’s consequences.

Daniel Malachuk works with business and government leaders on global direct investment strategies. He has advised many of the world’s leading companies and served in the public sector as director of White House operations. 


This article is sourced from fDi Magazine
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