The U.S. government has decided to postpone plans to tax the repatriated profits of U.S. multinationals.
U.S. companies have thus been saved from what could have been a $200 billion tax hike.
Its good news that this uncertainty has disappeared.
$200 billion isn’t chump change, even for U.S. corporates, and would have come at a horrible time.
This is a decent pro-business sign from the Obama adminsitration.
WSJ: The tax dispute is rooted in an unusual provision in the U.S. tax code. Nearly all industrialized countries tax domestic companies only for revenues earned at home. The U.S. taxes companies on world-wide profits. But current U.S. law allows American multinationals to defer paying taxes on revenues earned abroad until companies repatriate them, usually in the form of cash dividends to the parent company.
Critics long have complained that the provision encourages companies to avoid U.S. taxes by expanding production on foreign soil. On the campaign trail last year, President Barack Obama promised repeatedly to “end tax breaks for companies that ship jobs overseas.”
U.S. businesses counter that the deferral provision allows them to better compete globally, which in turn allows them to expand their U.S. operations, too. If the deferral were eliminated, they contend, the financial damage to their businesses would require them to cut jobs in the U.S.