US tax reform

What does it mean for Australia?

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Comprehensive tax reform in the US is making headlines globally.

The changes to the US tax system, led by the Trump Administration and Republican Congressional leaders, mean significant changes to corporate, individual and international tax rules.

Tax reform of this magnitude in the US will have a significant impact worldwide. In Australia, we face a huge challenge. In order to remain an attractive market for trade and investment, and stay competitive on a global scale, we need to bring our rates down to attract and retain capital and key talent.

 

Stay ahead of the curve with our Tax reform readiness webcast series

A panel of business specialists from across the PwC network dive into the details of tax reform and its multifaceted impact on your business from financial reporting to workforce strategies and tax function preparedness. 

Some topics covered include:

  • Global reaction to the US reform
  • Recent IRS tax reform guidance
  • Tax professional upskilling - Attracting and developing your workforce in digital world
  • Impact on deals and JV alliances
  • Tax reform's impact and opportunities for US taxpayers
  • Business goals and operating model alignment
  • Impact and planning considerations for high net worth individuals

Register here to tune in live or access recordings.

 

“Australian parliamentary representatives need to work together to ensure we remain an attractive location for foreign direct investment.”

Pete Calleja, Australian Tax Leader, PwC

US tax reform impact on non-US headquartered companies doing business in the United States

The 2017 tax reform reconciliation act (the Act) – the most significant overhaul of the US tax code (the Code) since 1986 – lowers corporate and individual rates, implements a territorial taxation system, limits the interest rate deduction for corporations, creates new taxes, and adds numerous new rules. Non-US headquartered companies doing business in the United States (US inbound companies) need to understand which provisions are relevant to their businesses and how these provisions will impact the cost of doing business.

If promised comprehensive tax reform was delivered in the US, the consequences to​ international business are the most significant we will see since we last saw major tax​ reform in 1986.

by Pete Calleja, Australian Tax Leader, PwC
The contours of reform aren't entirely settled at this point. While we are waiting for the ​final ​detail to emerge from the conference process reconciling the House and Senate bills​, businesses around the world are reviewing how the potential changes might impact their supply chain structures, capital structures and capital expenditures.

Despite the US corporate rate drop, Australian companies that are exporting from Australia to the US may find the proposed US House 20% excise ​changes to be disadvantageous.

Further, those Australian companies already ​manufacturing in the US but ​using Australian intellectual property may be disadvantaged by the US Senate ​base erosion and anti abuse tax (BEA​T) changes.”

If the proposed ​changes go through, the winners from Australia’s perspective may ​include Australian companies who are seeking to ensure both their intellectual property and manufacturing platform are based in the US ​for both US ​and foreign market ​supply.

It is now critical our Australian members of ​parliament focus on ensuring our country remains an attractive location for both local and ​foreign direct investment.

​The repatriation of US company funds is expected to be very significant. As ​investment ​capital becomes increasingly mobile, particularly in the boom industry areas of technology and health, a competitive local corporate tax regime is critical to ensure our economy remains a ​competitive location for investment.

With the OECD average corporate rate below 25% and falling, the proposed Australian rate change to 25% over a 10 year period is now more ​important than ever ​for our economic prosperity.

The depth and breadth of the proposed US changes should also challenge Australian policy makers to move beyond rate reduction and consider the merits of all other reforms given it is all of the the various US changes that together will likely yield significant benefits ​to the US economy.

 

The US tax reform: an update and the impacts on Australia

by Pete Calleja, Australian Tax Leader, PwC
The Senate on November 2 voted 51 to 49 to pass HR 1, the Tax Cut and Jobs Act, after adopting a substitute amendment offered by Finance Committee Chairman Orrin Hatch (R-UT) and two additional floor amendments offered by Senator Ted Cruz (R-TX) and Senator Jeff Merkley (D-OR).
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Next step is the reconciliation of the differences between the House and Senate passed versions of HR 1. The House on Monday, December 4 is scheduled to vote on a motion to request a formal conference committee with the Senate to negotiate a compromise bill ('conference agreement') that would be subject to an up or down vote in both chambers.

The GOP are still aiming to have a final bill for the President to sign by Christmas.

Given these rapid developments, once agreed this will be the most comprehensive tax reform in the US in recent history with the consequences to international business being the most significant since we last saw major US tax reform in 1986.

If the changes go through, the winners from Australia’s perspective include Australian companies who are seeking to use the US as a manufacturing platform for export to the Americas or more broadly to Asia and Europe.

Australian companies that are exporting from Australia and importing to the US may find the proposed US changes to be disadvantageous depending on their global operational footprint.

With the OECD average corporate rate below 25% and falling, the proposed mild Australian rate corporate reduction currently planned over a long 10 year period is important for our economic prosperity.

 

“Specifically in the boom industry areas like technology and health, a competitive local corporate tax rate is critical to attract foreign investment.”

Pete Calleja, Australian Tax Leader, PwC

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Contact us

Pete Calleja
Australian Tax Leader, PwC Australia
Tel: +61 2 8266 8837
Email

Peter Collins
International Tax Leader, PwC Australia
Tel: +61 3 8603 6247
Email

Michael Bona
Global Tax Leader
Tel: +61 7 3257 5015
Email

Paul Abbey
Partner, PwC Australia
Tel: +61 (3) 8603 6733
Email

Angela Danieletto
Partner, PwC Australia
Tel: +61 2 8266 0973
Email

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