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he effects of the Trump administra- tion corporate tax reformon U.S. multinationals that were, as of the end of last year, holding some $1.4 trillion in cash overseas, are largely beneficial: Now these companies finally know howmuch of that money the U.S. wants -- and there's also some long- awaited clarity on how foreign profits will be taxed going forward.What's less clear is how the changes will affect European plans to tax U.S. companies' profits where they're made. So far, it looks as though the newU.S. rules are a gift to European nations that they should hurry up and use. Up front, the U.S. government is taxing the accumulated foreign cash at 15.5 percent to treat it as repatriated. That's something of a relief to the biggest cash holders. Apple, whose foreign subsidiaries held $252.3 billion in cash and equivalents as of the end of Sep- tember 2017, had beenmaking provisions for U.S. federal taxes on its foreign profits. At the end of September, the company had on its books a deferred tax liability of $36.4 billion related to foreign subsidiaries' earnings. That's about 14.4 percent of the cash pile, meaning Apple will pay only slightly more than it has budgeted for the formal repatria- tion of the money (in reality, much of it was already invested in U.S. assets, anyway). Microsoft, with $127.9 billion of overseas cash as of June 30, 2017, the end of its finan- cial year, reported an unrecognized deferred tax liability of $45 billion on some $142 bil- lion of foreign income. Unlike at Apple, the new taxes will have a negative effect on the bottom line, but Microsoft will still pay only about half as much as it expected. No longer having to guess about the U.S. government's claims frees up the companies to invest the cashmore productively than by purchasing marketable securities. Expect some bold acquisitions from the U.S. tech and pharma giants, which holdmost of the cash. But it'll be evenmore interesting to see how the companies change their tax schemes in response to other parts of the U.S. reform, meant to tackle profit shifting. Starting this year, the U.S. taxes foreign in- come above 10 percent of revenue -- deemed to be the normal rate of return on tangible assets -- at 10.5 percent. This rate will go up to 13.125 percent in 2026. Companies will only get an 80 percent credit for foreign taxes paid. A 13.125 percent tax effective tax rate applies to income from licensing U.S. parents and other intellectual property to foreign companies. These measures are specifically meant to eliminate tech companies' favorite scheme: booking all the non-U.S. revenues in a low-tax country such as Ireland, with its 12.5 percent corporate tax rate, and then pay- ing almost all the profit to a company in, say, the Cayman Islands, as royalties for the use of intellectual property. Some companies -- Google is one example -- ended up paying al- most no tax on their non-U.S. profits thanks to the scheme. Now, the no-tax Cayman Islands part makes little sense, since the U.S. will be tax- ing the intellectual property-related profits anyway. The Irish part still looks good, though. As the auditing firmKPMG pointed out in a December note, Ireland's corporate tax remains attractive compared with the av- erage combined federal and state tax rate a company would pay if it booked interna- tional income in the U.S. So the Irish authori- ties hope the U.S. tax reformwon't hurt investment. Martin Shanahan, the chief ex- ecutive of Ireland's investment promotion authority, said earlier this month that U.S. companies expanded their Irish presence throughout 2017, even though they knew all about the reformplans. But the newU.S. tax structure doesn't just meanmultinationals will want to stay in low- tax European jurisdictions. It also gives these countries a potentially bigger revenue stream since it no longer makes sense to use royalty payments to erase non-U.S. profits -- and an opportunity to be bolder in taxing U.S. com- panies. Given the same tax base as in the U.S. (which, of course, is a simplification), they can raise their corporate tax rates for multi- nationals by a few percentage points with no fear that the U.S. will do anything further to outcompete themor that the firms will leave. The newU.S. statutory rate of 21 percent provides a comfortable upper bound -- and, given how difficult it will be for the U.S. to compensate for the loss of revenue, it's un- likely to go down in the foreseeable future. Essentially, U.S. legislators have done what France and Germany have long tried and failed to do -- establish a common corporate tax "floor" for the European Union. If Euro- pean countries charge less than 13.125 per- cent on the multinationals' profits, the U.S. will still take the money. Before, the low-tax countries always thwarted the Franco-Ger- man demands. Now, it no longer makes any sense for them to do so. Big European countries must thank U.S. legislators for this gift. But they cannot expect the U.S. to do all their work for them. It's still up to the EUmember states tomake sure the U.S. tech firms pay a fair share of taxes in each of the markets where they operate. It still doesn't make sense that profits made in France and Germany are being booked in Ireland -- and that can only stop if EUmem- bers agree among themselves about how they stop the practice without doing too much damage to Ireland. Trying to impose revenue-based taxes on the multinationals, as a group of bigger EUmembers proposed last year, is not the answer: The U.S. has proved that it's possible to set up a sensible systemof incentives without resorting to such unsubtle measures. -B LOOMBERG V IEW Opinion 3 News India Times January 26, 2018 T Published weekly, Founded in 1975.The views expressed on the opinion pages are those of the writers and do not necessarily reflect those of News IndiaTimes. Copyright © 2017, News IndiaTimes News IndiaTimes (ISSN 0199-901X) is published every Friday by ParikhWorldwide Media LLC., I15West 30th Street, Suite 1206, NewYork, NY 10001. Periodicals postage paid at NewYork, N.Y., and at additional mailing offices. Postmaster: Send address change to News IndiaTimes, 115West 30th Street, Suite 1206, NewYork, N.Y. 10001 Annual Subscription: United States: $28 Founder, Chairman & Publisher Dr. Sudhir M. Parikh Editor Ela Dutt Executive Editor Sujeet Rajan Reporter Ruchi Vaishnav Ahmedabad Bureau Chief Arun Shah Photographers Peter Ferreira, Deval Parikh Chief Operating Officer Ilyas Qureshi Executive Vice President Bhailal M. Patel Business Development Manager - U.S. JimGallentine Manager Business Development - Ahmedabad M.P. Singh Chauhan Senior Manager Advertising & Marketing Shahnaz Sheikh Advertising Manager Sonia Lalwani Advertising New York Shailu Desai Advertising Chicago Muslima Shethwala Syed Sheeraz Mahmood Consultant for Business Development Ahemdabad, India Digant Sompura Circulation Manager Hervender Singh Graphic Designer Ajita Kapoor Main Office Editorial & Corporate Headquarters 115 West 30th Street, Suite 1206 New York, NY 10001-4043 Tel. (212) 675-7515 Fax. (212) 675-7624 E-mails editor@newsindiatimes.com advertising@newsindiatimes.com Website www.newsindiatimes.com Chicago Office 2652 West Devon Avenue, Suite B Chicago, IL 60659 Tel. (773) 856-3345 California Office 650 Vermont Ave, Suite #46 Anaheim, CA 92805 Mumbai Office Nikita Ajay Pai Goregaon, West Mumbai Ahmedabad Office 303 Kashiparekh Complex C.G. Road, 29 Adarsh Society Ahmedabad 380009 Tel. 26446947 F ax. 26565596 Leonid Bershidsky Bloomberg View columnist U.S. TaxRulesAreAGift ToEurope A s more international travelers decide to skip America, 10 business associa- tions including the U.S. Chamber of Commerce and the National Restaurant As- sociation have created a travel industry group aimed at reversing the growing un- popularity of the U.S. as a vacation destina- tion. Historically, America had only to sit back and let foreign tourists and their money roll in. Over the past few years, though, that gravy train has begun to dry up, a trend that accelerated as President Donald Trump began to make good on campaign promises to restrict immigration. As a result, busi- nesses that make up the multibillion-dollar industry that relies on that revenue have grown increasingly nervous. So some of its biggest players unveiled the "Visit U.S. Coalition"on Tuesday to spur the Trump administration into enacting friend- lier visa and border-security policies at a time when federal agencies are doing the opposite. Since 2015, the U.S. and Turkey have been the only places among the top dozen global travel destinations to see a decline in in- bound visitors, at a time when other nations such as Australia, Canada, China and the United Kingdom have marked sizable gains. Last week, the Commerce Department re- ported a 3.3 percent drop in traveler spend- ing for last year, through November, the equivalent of $4.6 billion in losses and 40,000 jobs. The U.S. share of international long- haul travel fell to 11.9 percent last year from 13.6 percent in 2015, according to the U.S. Travel Association, a slippage the group said equates to 7.4 million visitors and $32.2 bil- lion in spending. (The average "long-haul" visitor to the states spends 18 nights and $4,400, according to U.S. Travel.) "America isn't winning when we're falling behind our global competitors," Roger Dow, U.S. Travel's president, said on a conference call to announce the new organization. He added that the group sees its initiative as complementary to increased border and travel security. "Our goal is to make America the most secure and the most visited coun- try on earth-and we can do both." Industry groups weren't silent as Amer- ica's desirability among travelers began to decline, but the coalition represents a new determination to reverse the trend. The in- clusion of broader business lobbies is "an at- tempt to graduate to a new level of urgency" for policymakers to arrest the problem, said Jonathan Grella, a U.S. Travel vice president. The coalition plans to present specific policy changes to the administration, including ef- forts to speed visa processing times, that it expects will help boost tourism. (Represen- tatives of the State Department's Consular Affairs Bureau and the Commerce Depart- ment didn't immediately return requests for comment made after normal business hours.) Coalition organizers said America re- mains a vital draw for foreign travelers and that only modest policy changes would be required. As an example, they noted how the U.S. successfully corrected a steep decline of inbound travel in the decade following the 2001 terrorist attacks. - B LOOMBERG U.S. Travel IndustryUnitesToFightDecline InForeignTourism By Justin Bachman

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