Hoax, or Sign of the Second Coming...,
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...[02/05 on a 10/04] change in how U.S. companies are taxed on foreign profits....Under the new law, a U.S. corporation with a stake in certain foreign corporations may make a one-time election this year to deduct 85% of the qualifying cash dividends that it receives from the foreign corporations. Companies can shift foreign earnings to their U.S. headquarters at an effective 5.25% rate, instead of the typical 35% corporate rate.
They say the purpose is "job creation", but the first thing I thought of was trade deficit reduction - if only because my reading tonight (pretty sure jim started it, but maybe it was caps) spurred some incoherent thoughts on the topic - and this would be an incentive for repatriating as much as possible this year: Pfizer's $38 billion alone would take out a good 65% of January's record $58.3 billion, assuming none of it would have been repatriated otherwise. Minor one-time boost to federal revenue, possibly significant boost to capital inflows, huge one-time tax break for corporations. Apparently one of the "investments" that allow the reduced rate is marketing, and I have a knee-jerk hatred for marketing, so five months ago I could have said 'bad congress, bad' and hit it over the head with a newspaper.
update: steve kirchner found some figures:
US repatriation of funds in 2005 related to legislation passed last October should reach $350 bln. ... the payments will not directly impact the headline current account or GNP figures for each of the quarters of 2005. But, the payments will depress the “U.S. direct investment abroad” figures in the U.S. capital account by the size of the quarterly dividend payments.
...growing cross-border ownership and control of equity capital requires greater sophistication in interpreting current account data.
:: posted by buermann @ 2005-03-13 23:48:30 CST |