BP expects long term ‘Trump bump’ from the new US tax plan — but it’s taking a $1.5 billion hit for now

US President Donald Trump. Wikimedia

  • Oil and gas giant BP expects a boost from Trump’s new tax plan in the long term.
  • But re-evaluating accounts means it could take a one-off $US1.5 billion (£1.1 billion) balance sheet hit.
  • Trump’s plan has been the subject of intense debate in the USA.

LONDON – British oil and gas giant BP expects newly passed tax changes in the USA to “positively” impact future earnings but warned it will take a short-term hit due to the adjustments.

In a statement to the markets released on Tuesday morning, the FTSE 100-listed firm said that it expects “its future US after-tax earnings to be positively impacted by the recently-enacted changes to US corporate taxes, largely due to the reduction of the US federal corporate income tax rate from 35% to 21%.”

Estimate the exact impact is difficult as it is “subject to a number of complex provisions in the legislation which BP is reviewing,” the company said.

While the tax changes should be positive in the long term, BP expects a short term negative hit to its balance sheet. BP currently accounts for certain tax discounts based on the old system and re-evaluating this will result in one-off charges.

“The lowering of the US corporate income tax rate to 21% requires revaluation of BP’s US deferred tax assets and liabilities,” BP said. “The current estimated impact of this will be a one-off non-cash charge to the Group income statement of around $US1.5 billion that will impact BP’s fourth quarter 2017 results.”

The tax changes brought in by the Trump administration just before Christmas have been the subject of intense debate in the USA. Supporters tout the new plan as a wage-boosting, job-creating boon to the middle class, as well as a means of simplifying the tax system. Critics argue that it is simply a thinly disguised way of cutting taxes for the rich and big corporations.

BP’s tax update comes shortly after analysts at JPMorgan reaffirmed their “overweight” rating on BP’s stock for the foreseeable future – meaning that they are effectively recommending that clients buy the company’s shares.