US: Potential corporate and economic impact of repatriation process - HSBC

According to the analysts at HSBC, repatriation of overseas earnings may be part of a broader US tax reform package, which the US administration has said is a policy priority.

Key Quotes

“It would dispense with the current practice of taxing overseas earnings only when they are repatriated to the US. Instead, taxes on the estimated USD2.5trn pool of overseas earnings would no longer be deferred and face a one-off tax liability of between 3.5% and 10.0%. The fiscal boost would likely be modest but this reform proposal is important because it is one of the few revenue generating measures under consideration, and also one of the less contentious ones.”

“The USD impact is likely to be modest given the bulk of these earnings are already denominated in USD. The potential uses of these repatriated funds include the funding of share buybacks, dividend payments, debt retirement, and M&A rather than for capital expenditure or job creation.”