A US tax bill might trigger a global supply chain reshuffle as it could encourage US firms to shift manufacturing facilities from Asia or elsewhere to Mexico to enjoy lower tax rates on exports, Ernst & Young Taiwan said yesterday.
By cutting corporate income tax from 35 to 21 percent, lower than the average tax rate of 24.7 percent in Europe, the US could attract capital repatriation from overseas, Taipei-based partner Sophie Chou told a media briefing.
Taiwanese policymakers should take the matter seriously, as the Netherlands, Belgium, the UK and France are also mulling similar tax cuts or extending tax incentives for reinvestment plans, Chou said.
Taiwan is seeking to raise business income tax from 17 to 20 percent, while halving the tax on retained earnings from 10 to 5 percent to make the nation’s wealth distribution more equitable.
“The move is bucking the global trend,” Chou said.
The legislature is holding a special session with the tax reform bill on top of its agenda.
Upstream and downstream suppliers of Hon Hai Precision Industry Co (鴻海精密), a major assembler of Apple Inc’s iPhones, are evaluating investment opportunities in the US after Hon Hai unveiled a plan to build a flat-panel plant in Wisconsin to provide screens for a wide range of applications, such as TVs, self-driving cars, aviation and office automation systems, as well as education, entertainment and healthcare applications.
The US tax reform is lending further support by allowing export revenue to qualify for the favorable 13.125 percent tax rate, Chou said.
Foreign firms that used to have a limited presence in the US, such as distribution offices, might be encouraged to expand their operations, she said, adding that they might consider moving manufacturing facilities to Mexico to take advantage of cheaper labor costs there and favorable tax terms with the US.
Capital repatriation might give US firms extra cash for mergers and acquisition, and UK firms might become their targets as they have become cheaper amid the British pound’s depreciation, Chou said. |
Inquiry list
CYRUS Facebook INDUSTRIE 4.0/AUTOMATIC OPTIC INSPECTION
