No Reduced Tax For Earnings Repatriated To US

by Mike Godfrey, Tax-News.com, Washington

27 May 2003

US firms with substantial overseas sales were dealt a blow last week as a measure that would have slashed corporate tax on repatriated earnings was dropped from the main tax cut bill.

The proposal would have cut the rate of tax on overseas revenue to 5.25 per cent, down from the current rate of 35 per cent. This would have been especially welcomed by the technology industry, many firms of which sell a large proportion of their products abroad. For example, according to a spokesman for chip maker Intel, some 70 per cent of the firm's $26 billion annual revenue is generated from overseas sales.

However, estimates vary widely as to exactly how much the tax cut would have benefited the domestic economy. The Congress Joint Committee on Taxation calculated that an extra $140 billion would be reinvested in the US, whilst investment bank JP Morgan put the figure nearer $300 billion.

Nevertheless, some are still optimistic that the tax cut will still reach the statute book if a separate bill named the Invest in USA 2003 Act, sponsored by Senators Barbara Boxer (D-CA) and John Ensign (R-NV) garners enough congressional support.

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