Author: Andrea Fiano

Will the latest US tax reform increase the attractiveness of the United States for foreign companies? Will companies line up to establish or increase operations in the US? And, if so, will this force other developed economies to follow suit and drop their tax rates?

These were the questions we had in mind when we chose the topic of this month’s cover story. In a very detailed piece, Craig Mellow answers many of these questions—not necessarily in a positive way—and shows it is too early for a definitive assessment.

According to some observers, the most immediate effect seems to be repatriation of capital by US multinationals. Some claim that M&A activity in and from the US has already benefitted from repatriation, by unblocking deals that were on hold for months pending further details on the tax plan. The possibility to depreciate 100% of the cost of an acquisition or an investment immediately, rather than under the previous schedule of 20 years, seems an attractive feature for domestic and foreign capital. Many other aspects of the reform still need to be fully analyzed. And many experts confirm that large companies, American or not, are currently reconsidering their fiscal plans in light of the reform.

 “The US tax reform is very broad and complex and some of the new rules (BEAT and GILTI in particular) will certainly have an impact on the supply-chain structure of multinationals,” says Stefano Schiavina, who heads the Italy Desk at Deloitte Tax LLP in New York. “But I believe that the overall effect for foreign groups with investments in the US will be a lower tax bill, due to the huge reduction of the corporate tax rate, the immediate deductibility of the cost of tangible goods (although for a limited period of time) and the introduction of rules with an effect comparable to the European IP box regimes.”

The debate has only started and plenty of the other stories, and remarkable awards, enrich this issue of the magazine.

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Andrea Fiano