US tax reforms causing companies to ‘pause for thought’

The potential for US tax reforms has caused 55 per cent of company financial officers or tax directors to alter their tax plans or delay tax related decisions according to new research. However, that research predominantly relates to US tax decision makers, according to Martin Phelan, a partner with William Fry Tax.

President Donald Trump's plan to cut the US corporate tax rate from 35 per cent to 15 per cent is causing financial officers to "pause for thought" according to Tim Wach, managing director of Taxand, a tax advisor that carried out the research.

"As we await more thorough proposals, US multinationals are somewhat scrambling in the dark, and are rightly concerned about potential impacts from what may prove to be dramatic tax reform, if Republican plans for a border adjusted cash flow tax are pursued, or if the much less ambitious Trump proposals are pursued," Mr Wach added.

Inbound tax jurisdiction

Mr Phelan noted that "Ireland probably has the most US capital investment in Europe" and that most US companies use Ireland or the UK as their entry to the European market. He suggested the difficulty of that is that Ireland is "effectively a victim" of tax decisions being made in the US.

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Ireland appears to be particularly vulnerable considering it is an inbound tax jurisdiction. Mr Phelan added that tax decision making in Ireland is “driven by external factors which aren’t necessarily under Ireland’s control”.

Irish concerns aside, the Taxand poll also shows that, when asked about tax transparency, 88 per cent of financial officers or tax directors said they were concerned about the potential exposure of information provided to meet country-by-country reporting standards. Meanwhile, 96 per cent of respondents said global tax transparency will increase the cost of compliance.

“Public scrutiny can have significant reputational risk for corporates that fail to respond robustly to questions over their tax affairs. Firms must ensure, when deciding their tax policy, that they are willing to stand behind any decision,” Mr Wach said.