I am a CPA with 35 years overall tax experience and 25 years of specialized international tax planning experience.
After studying the new federal tax legislation, I’m not surprised to see it being rushed through the legislation process without proper study and debate, because I’m convinced that it will have the opposite effect on manufacturing jobs that is being claimed by Republican leadership.
Lowering the U.S. corporate rate to 21 percent (slightly below the global average of 24.25 percent) sounds good on its face. However, many countries that have taken U.S. manufacturing jobs (e.g., Hong Kong, Taiwan, Vietnam) already have lower (than 21 percent) corporate tax rates.
Also, most other countries have the VAT (value-added tax), an additional source of revenue, that will allow them to further lower their rates to counter the U.S. tax rate reduction. Without our own VAT, we cannot win a race to the (corporate rate) bottom.
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But the real kicker is the new “territoriality” system that never taxes offshore profits earned from “brick-and-mortar” subsidiaries. These provisions create incentives for manufacturing businesses that do not utilize a lot of intellectual property to be started up (or moved) offshore, at no U.S. tax cost, to benefit from lower wages and taxes.
John Morton, Templeton