AJCA Tax Break Not Working, Report Suggests

by Mike Godfrey, Tax-News.com, Washington

06 October 2005

According to a Wall Street Journal report published on Wednesday, although many US firms have taken advantage of a tax break contained in the American Jobs Creation Act, the goal of the incentive - to create more jobs in the United States - may not be being fulfilled.

The tax break allows companies to repatriate profits from overseas operations at a special 5.25% tax rate, compared to the normal rate of nearly 25%. The deadline for taking such action is December of this year.

The WSJ revealed that 91 large firms have announced that they will be repatriating some profits under the one-year scheme, bringing back an estimated $206 billion.

However, the business daily revealed that although the majority of the companies concerned have released only broad outlines of their plans for the extra cash, job creation does not appear to feature highly.

The report went on to add that:

"Some companies are even bringing home piles of cash while continuing to downsize. Colgate Palmolive Co., of New York, said in July that it planned to repatriate $800 million, at a time when the company also is pursuing plans to shut a third of its factories and eliminate roughly 12% of its work force, or 4,450 people, over four years."

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