University of Minnesota - UMN Executive Leadership Insights
U.S. Corporations' Repatriation of Offshore Profits
Report

U.S. Corporations' Repatriation of Offshore Profits

Michael Smolyansky, Gustavo A. Suarez and Alexandra M. Tabova
Federal Reserve Board, 2018
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Editorial Rating

8

Qualities

  • Analytical
  • Eye Opening
  • Overview

Recommendation

Corporate leaders have responded to the 2017 US Tax Cuts and Jobs Act with a wave of capital repatriation from overseas, bringing back in just the first three months of 2018 almost one-third of the $1 trillion in foreign-earned assets stashed abroad. Economists Michael Smolyansky, Gustavo Suarez and Alexandra Tabova examine the repatriation boom and how businesses are currently deploying this capital in an insightful report for company executives and tax policy experts.

Summary

For years, executives of US-based multinational corporations faced a dilemma. Profits earned outside the United States faced taxation at the rate of the country in which they originated. However, CEOs also faced double taxation, potentially at the top corporate rate of 35%, if they wanted to return those profits to America. As a result of this disincentive, company leaders held $1 trillion in assets in foreign subsidiaries to avoid punitive US tax rates. The 2017 Tax Cuts and Jobs Act (TCJA) removed this barrier and instituted a policy in which profits are only taxed once, in...

About the Authors

Michael Smolyansky, Gustavo Suarez and Alexandra Tabova are economists with the Board of Governors of the Federal Reserve.

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