Taxing Offshore Operations A Huge Blow To US Multinationals

The US Treasury needs money to offset growing deficits and the Administration plans to get that capital by whatever means are necessary.

According to The Wall Street Journal, the new proposal “aims to change the legal treatment of offshore subsidiaries and structures that companies have used to avoid not only U.S. taxes, but taxes in other developed countries as well.”

Global companies will have nowhere to hide.

What is not clear now is what the fall-out on corporate earnings may be, but it could be considerable. While the move may help the federal government, it could undermine theearnings per share at America’s larges firms and even hurt their cashflow enough to make it more difficult to raise money using debt instruments.

Since earnings drive stock prices, lower EPS may push down shares in big companies and hurt shareholders, an excellent way to damage the net worth of many individual investors and institutions more than they already have been, an unintended but important consequence.

Douglas A. McIntyre