The US Republican tax overhaul passed by Congress this week includes repatriation of cash to the US for some companies, but the main gain will be the cut in the corporate tax rate from 35% to 21%.
New Zealand-listed camper van and tourism operator Tourism Holdings has extensive operations in US and expects full-year 2019 to include some benefits from the tax cuts.
Chairman Rob Campbell highlighted the legislation’s immediate effect was not clear.
"Based on the current distribution of Tourism Holdings’ earnings across the US states, and the current state tax rates, the effective total income tax rate including state taxes ... is expected to reduce from around 40% to around 27%," Mr Campbell said.
For the first full year, ending June 2019, Mr Campbell said at current earning levels and exchange rates, the after-tax profit range could be up by between $2.3million and $3million.
Mr Campbell said "bonus depreciation" claims were being increased and extended, which he understood included camper vans, which would be subject to 100% deductibility in the year of purchase.
Reuters reported yesterday the overhaul would allow Apple to bring back its $252.3billion foreign cash pile without a major tax hit — a long-standing company goal.
But not everything went the company’s way.
A critical difference between the Senate version of the Bill and the final version could actually raise the amount of cash taxes Apple pays on profits from patents held abroad, tax experts said.
The company attributes a large portion of the value of its products to patents and other intellectual property such as trademarks. Apple assigns some of that IP, proportional to overseas sales, to subsidiaries in countries with low tax rates and assesses substantial patent royalties on sales.
Those royalties then flow back to those low-tax locations, such as Ireland.
The Bill has a pair of provisions designed to make that manoeuvre less alluring. One creates a minimum tax on foreign patent income that is expected to come to about 13%, Gavin Ekins, a research economist with the Tax Foundation, said.
At the same time, a tax break for patents held in the US will lower the tax on licensing income from the standard corporate rate of 21% to 13.1%, about the same as if the patents were held abroad.
- Additional reporting: Reuters
