US president Donald Trump is expected to propose a cut in the US corporate tax rate to 20 per cent in a bid to lure US companies and investment back to the United States.
Mr Trump is due to fly Indianapolis later on Wednesday to deliver a key speech on tax reform, in which he is expected to propose slashing the corporate tax rate and offering a tax amnesty to companies who harbour profits offshore.
Mr Trump is expected to call for a 20 per cent corporate tax rate - down from the 35 per cent federal rate currently levied on corporate profits - one of the highest in the developed world.
While much of the announcement will focus on a reform of the individual tax system, the US president is expected to set out his proposal for a dramatic reform of the corporate tax system and a new system of taxing overseas profits, in a bid to encourage US companies who are holding profits in tax havens to repatriate their profits.
Speaking ahead of the announcement, Mr Trump said that the new tax regime would mean “jobs will start pouring in from all over the world coming back to our country.”
“We’re the highest-taxed nation in the developed world, and we want to become one of the lowest, and that’s what we’ll be doing,” he said ahead of a meeting with a bipartisan group of lawmakers in congress.
“We will become a competitive nation again. We won’t see companies leaving our country, firing their people, and going and then selling their product, by the way, back into our country with no tax and no retribution,” he said, adding: “we’re going to go super-competitive.
The proposal is the result of months of intense behind-the-scene negotiations between the Trump administration, the Ways and Means Committee in the House of Representatives, and the Senate Finance Committee, as the Republican Party strives to score a legislative victory before the end of this Congressional term.
While today’s announcement is the result of this collaborative process, it marks the first stage in a legislative process that could take months, with much of the detail likely to be thrashed out in the relevant congressional committees before year-end.
Nonetheless, the Trump administration's proposal represents the most comprehensive reform of the US tax system in decades, and reflects an ambition of both parties in Congress to reform the corporate tax system.
With hundreds of US companies located in Ireland, the announcement is expected to be closely watched by the Government in Dublin.
Ireland has been name-checked by the US president in recent months, as a country where US companies have established operations because of the tax regime. A cornerstone of Mr Trump's 'America First' policy, which helped to propel him to the White House was a promise to encourage US companies to move operations back home, in the process creating American jobs.
Mr Trump is also expected to announce a change to the way the United States treats profits that are earned overseas, with the US transitioning from a worldwide system to a territorial system.
On the personal taxation side, the White House wants to reduce the number of individual tax bands from seven to three. Mr Trump is expected to announce a top individual tax rate of 35 per cent. Also under consideration is the elimination of the current system of itemised deductions - one of the main reasons behind the complexity of the US’ tax code - and instead doubling the standard deduction.
