The implications of US tax reform under a Trump presidency go far beyond the US

2016 has brought a number of shocks to the global system. The latest of these – the election of Donald Trump as US president – brings the prospect of major changes in US tax policy and legislation. The mooted changes include sharp cuts in tax rates – especially corporation tax – and actions both to discourage tax inversions by US companies, and also to drive the repatriation of US corporate profits held as cash offshore. The cross-border and even global nature of these actions means their effects would be felt by governments and companies far beyond the US.

To date in 2016, we've spent a lot of time thinking about Brexit. Now it’s time to look at the implications for the international tax environment of Donald Trump's election. It’s not just the US that will be impacted by the very real potential for US tax reform.
Corporate partner James Wilson

The process for creating US tax policy and legislation is complex and multi-party

The US tax environment is statute driven, with legislation passed by Congress and signed by the President. The Treasury/IRS can issue regulations under the statutes: these regulations may be either “interpretive” – representing a judgement call by the Treasury – or “legislative”, following a grant of authority by Congress.

In terms of how an idea becomes statutory law in the US, the House of Representatives, Senate and White House all have a role to play, with the Senate passing laws either through a filibuster-proof 60 votes or a reconciliation process. For a Trump presidency, problems in getting bills through Congress are more likely to arise in the Senate than the House of Representatives.

The process of US tax reform is further complicated by the diverse range of players involved, each with their own agendas – with key individuals across Team Trump and both houses of Congress. There’s also the Joint Committee on Taxation (JCT), a committee of staff members who advise Congressional tax writers on legislative language and estimate the costs of legislation.

>>For more information, download 'Key Themes from the Baker McKenzie breakfast seminar on US Tax'

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