EuroWire March 2015

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Transatlantic cable
March 2015 44
The widely consulted barometer of customer morale is at its
highest since August 2007, the Conference Board said.
† In January, on a year-to-date basis, the US dollar was up
8.8 per cent versus the Euro, 3.2 per cent against the British
pound, and 2.4 per cent against the Yen, with almost all of
the gains coming since midyear 2014. While recognising a
signi cant performance, David Kelly, chief global strategist
for J P Morgan Funds, observed that currency movements
have always been complicated in both their causes and
consequences.
Writing in Barron’s (31st January), Dr Kelly also suggested
that the strength of the greenback is encouraging for future
capital investment. While a higher dollar presents challenges
for American corporations, he said: “At this time it appears
to be a positive force in the global economy and, in the long
run, for global investors.”
President Barack Obama seeks to close
a tax loophole that allows American rms
to avoid paying taxes on overseas pro ts
The USA scal budget for 2016, presented 2 nd February,
contained some additional bad news for big American
multinationals. It includes a proposal for a one-o 14 per cent
tax on US pro ts stashed overseas, as well as a 19 per cent tax on
future pro ts as they are earned.
Currently no tax is due on foreign pro ts so long as they are not
brought into the USA. A company may postpone the payment
of taxes inde nitely by simply leaving its pro ts in the low-tax
jurisdictions in which they were generated.
BBC News (2 nd February) cited a calculation by research rm
Audit Analytics that, as of April 2014, American companies had
$2.1 trillion in pro ts stashed abroad. The conglomerate General
Electric was found to have the most pro t ($110 billion) stored
overseas. Tech giants Microsoft and Apple also avail themselves
of the tax loophole.
The White House said the immediate 14 per cent tax would raise
$238 billion, which would help fund a $478bn public works
programme of road, bridge and transport upgrades.
President Obama told broadcaster NBC that, despite several
years of economic improvement, wages and incomes for
middle-class American families were ‘just now ticking up.’
While the projected 19 per cent permanent tax on overseas
pro ts is far lower than the current USA top corporate tax rate
of 35 per cent, the expectation is that its implementation would
encourage multinationals to create jobs at home.
† A device enabling companies to put o , essentially
forever, the payment of taxes on trillions in pro ts may
seem indefensible. But its elimination faces long odds in
a Republican Congress united in erce opposition to all
things Obama. Even so, the scrutiny attracted to it by the
presidential push has to be very unwelcome in the executive
suites of some of the world’s most successful companies.
Dorothy Fabian
USA Editor
for the wire and
cable industries
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