Trump’s push to cut America’s corporation from 35% to 20% could encourage US companies to repatriate some of their immense overseas cash piles.
Fortune Magazine says this is a victory for tech giants, who have lobbied hard on this issue:
Tech companies like Apple and Microsoft have for a long time balked at the 35% corporate tax the current tax code requires them to pay on worldwide profits returned to the U.S. To avoid paying, the companies have parked as much of their profit as possible in overseas subsidiaries in countries like Bermuda and Ireland, where tax rates are low.
The Big 5 tech companies–Apple, Alphabet, Amazon, Facebook, and Microsoft–currently have a combined $457 billion held in overseas subsidiaries. Apple holds more profits overseas than any other company, with Microsoft not far behind.
Europe’s stock markets are recovering from Friday’s shock news that former Trump advisor Michael Flynn had pled guilty to lying to the FBI.
Rebecca O’Keeffe, head of investment at interactive investor, explains:
“European markets are playing catch up after closing at the depths of the Friday market meltdown on Michael Flynn concerns and embracing the weekend’s senate tax bill success.
The pro-business tax cuts look set to boost US economic growth and have provided further impetus for US and global valuations.
Every sector of the FTSE 100 is up this morning.
Multinational equipment rental firm Ashtead Group is leading the way, up 3.5%, followed by cruise company Carnival and plumbing and heating firm Ferguson.
Ashtead and Ferguson both have big operations in America, so would benefit if Trump’s tax reforms do deliver a growth burst.
All the major European stock markets are up this morning, after the US Senate approved the tax reform package over the weekend.
The German DAX is leading the charge, up over 1%, with Britain’s FTSE 100 and the French CAC close behind.
Hussein Sayed, chief market strategist at FXTM, says:
The U.S. Senate’s approval to pass the tax cut bill on Saturday overshadowed the continuing investigation into connections between U.S. President’s inner circle and Russia.
The US dollar has jumped by 0.5% against a basket of currencies this morning, reports Reuters.
The agenda: Markets welcome Trump tax breakthrough
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Stock markets in Europe and America are set to rally today, after Donald Trump took a massive step towards shaking up the US tax system.
In Trump’s first legislative triumph, the Senate finally passed the president’s long-awaited tax reform bill. The move means the president can look forward to signing off a final bill on tax reform soon.
The reforms include a hefty cut to US corporation tax, down from 35% to 20%, bringing America into line with other advanced economies. There are also sweeping changes to individual tax rates – which Trump claims will make people “very, very happy’.
But…the “once-in-a-lifetime” plan to cut taxes for “average Americans” has been criticised by experts who say it’s a shameless giveaway of wealth to the richest 1%.
Republicans claim that the $1.4tn package of cuts can be funded through growth; but an independent committee found it could add $1 trillion to the national debt.
Democrats, though, slammed the changes as a giveaway to corporate America and the wealthy.
Chuck Schumer, the Senate minority leader, declared:
“In the waning hours, this bill is tilting further towards businesses and away from families.
“Every time the choice is between corporations and families, the Republicans choose corporations.”
But the financial world is welcoming the Senate vote, despite the pressure building on the White House over links with Russia.
Today, Wall Street is tipped to open strongly, possibly driving the Dow Jones to a new all-time high.
The FTSE 100 has already reacted, jumping by 60 points to 7360 at the start of trading in London.
But sterling is under pressure this morning as Theresa May heads to Brussels for crunch talks with the EU.
The pound has shed almost half a cent at $1.343, amid reports that London and Dublin haven’t (yet) reached an agreement on the Irish border.
As my colleague Lisa O’Carroll reported last night:
Theresa May and the Irish government have failed to reach a deal on the crucial Brexit issue of the Northern Ireland border ahead of a crunch meeting on Monday lunchtime with the European commission president, Jean-Claude Juncker.
Despite intense efforts over the weekend to agree a proposal on how to avoid a hard border in Ireland, Irish officials revealed at midnight on Sunday that “there is still a way to go” to achieve a meeting of minds on the issue.
But there could be plenty of drama in Brussels, as Britain pushes for a breakthrough that would pave the way for trade talks.
Also coming up today, we get a new health check on Britain’s builders (who have been struggling in recent months) plus the latest eurozone investor confidence index and US factory orders figures.
Here’s the agenda
- 9.30am GMT: UK construction PMI for October
- 9.30am GMT: Eurozone Sentix investor confidence report
- 3pm GMT: US factory orders for October
guardian.co.uk © Guardian News & Media Limited 2010