Reduction in Cooperate Tax
Dear Mr. Dimon,
There have been rumors that the state is planning to reduce the corporate taxes. As recorded in the New York Times last week the state is reducing the corporate tax from 35% to 20%.
This is good news to most of the companies who are greatly affected by the corporate taxes. There are very many changes that will be expected of the companies when the taxes reduce.
This is good news to most of the companies that reserve their wealth in foreign countries finding it hard to move it back to the United States because of the high taxes. This is a great opportunity for them to repatriate the profits made abroad back home as there will be little deductions made to the money in the form of taxes. Companies are encouraged to use this opportunity that comes once in a blue moon.
The United State, over the years, has been subjected to the highest corporate taxes among the developed countries. It has been ranging from 35-39. Setting up new companies will be easier and cheaper. Thus, new industries and companies are expected to be established during this period. This will also be an opportune time for companies that would wish to open new branches as the taxes to do so will be lower.
Dividend share will be high as there will be little deductions made to the overall profits made by industries. The shareholders are expected to get more money from the shares they have invested in various companies. The increase in the total earnings by the shareholders will enable to buy back the companies’ shares in they had initially sold off.
The reduction in tax will favor many companies positively although there are those that feel like the reduction will affect the economy. The economy may be affected positively as the companies will require more accountants and more lawyers to work on the repatriated investments.
The stock exchange market is likely to perform very well, thus, if there are shares that the company would wish to sell some shares this would be most opportune time (Craig & Alexander, 60). Once the tax is reduced, the dividends share will be expected to increase within the next financial year. Thus, the shareholders become among the first to benefit from the decrease.
The CEO’s are expected to be vigilant to ensure that that the companies adapt to the changes appropriately. Companies that would wish to make foreign investments this also the best time as the capital transfer rate is low. The companies make more profits and can be able to expand their operations in and outside the country.
Increase the local companies operations to increase the local profits as the taxation will also reduce. Companies are expected to increase their operations and workforce to manage the capital that has been repatriated. Employees can also be transferred from one country to another.
There is massive capital transfer making fraud deals to increase. The companies are supposed to be more vigilant during the capital transfer to ensure that they do not incur heavy losses from the fraud cartels and brokers (Joseph & Jay, 148).
Doidge, Craig, and Alexander Dyck. “Taxes and corporate policies: Evidence from a quasi natural experiment.” The Journal of Finance 70.1 (2015): 45-89.
Stiglitz, Joseph E., and Jay K. Rosengard. Economics of the Public Sector: Fourth International Student Edition. WW Norton & Company, 2015.