With the new tax reform coming into place, many American firms are expected to repatriate money from abroad, especially from the EU, with a reduced price tag. Interestingly, there is about $2.5 trillion of unremitted foreign profits accumulated over the past three decades that are expected to come back to the US. The US government expects to collect around $339 billion in the next decade in repatriation tax.
The new GOP tax law lowers repatriation tax rates to 15.5%, and to even 8% for illiquid assets, as compared to the traditional 35% rate. Even though many companies are expected to announce how much they will bring back, other firms will report their losses abroad in the near future. Corporate giants are also taking advantage of bringing their cash back to the US shores by laying out plans to invest here in the US and contribute to the economy.
Many companies have waited a long time for this moment and are ready to capitalize on this provision. Companies from a variety of industries, including Tech, Healthcare, Consumer products, and Finance, are planning to repatriate their funds. An analysis by the Zion Research Group illustrates that the tech and healthcare industries represent more than half of the $2.5 trillion funds abroad. Also, just a few firms across all the industries represent a highly disproportionate share of these funds, which include: Apple, Microsoft, General Electric, Merck, IBM, and Exxon Mobile.
The funds coming back to US shores through repatriation tax will have several positive impacts. The US government may be able to finally increase funding towards new infrastructure plans around the country, as president Trump has stated to be one of his top priorities. Additionally, companies will be sitting on new repatriated cash mountains and will certainly look to invest back into their business, which generally entails the creation of new jobs. The healthcare industry is considered to be one of the biggest beneficiaries of this new tax plan, and some of their funds can be used towards expanding drug-research programs.