Executive Summary
- The big tax overhaul in the U.S called Tax Cuts and Jobs Act (TCJA) includes provision for limiting deduction of net interest expenses, expensing short lived investments in full and eliminating corporate alternative minimum tax. It is expected to reduce corporate tax rate to 21% in 2018 from the current rate of 35%.
- TCJA could help largest 500 companies in the U.S to reduce taxes between $75b to $100b thereby uplifting profitability by 8%. Nearly 3/5th of these companies have announced bonuses, hikes, and increment in 401(k) contributions.
- A CNBC/Fed survey forecasts nearly 50% of the tax benefits to the companies can be used in paying dividends, buyback of shares and 13% in repayment of debts. Only 12% will go to employees in the form of increased salaries and the rest 23% would be used to create new capital.
