US tax reform for multinationals | Vertex Exchange Europe 2018

Bernadette Pinamont explains the interconnected complexities in the new US tax code


Tax technology provider Vertex hosted a two day conference in April 2018, bringing their experts in tax and technology together with their partners and clients. European CEO joined them to learn about the tax compliance challenges that multinational businesses are facing, and the trends in technology and automation that are helping them manage. In this video, Vice President of Tax Research Bernadette Pinamont explains that while US tax reform promised simplicity, what it has delivered is a challenging repatriation tax and three new interconnected acronyms: the GILTI, the BEAT, and the FDII. She helps make some sense of how businesses are preparing.

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Bernadette Pinamont: The most important thing that businesses need to know about US tax reform is that, although the headlines said that it would be simpler, it is anything but.

One of the areas is the repatriation tax. And the repatriation tax applies two rates: one to cash, and one to capital. So companies are hard at work divvying up their accumulated earnings and profits into these two buckets. That is a challenge for every company that I’ve spoken to.

The other area that they’re really wrestling with are the three new international tax provisions. Three acronyms: the GILTI, the BEAT, and the FDII. There’s a lot of complexities with these calculations. There may be new data needed by companies for these calculations. They are all interconnected, so minimising one maximises one or more of the other two. So, a little bit of a see-saw effect going on, and tax departments are intricately planning and trying to really comprehend what those provisions mean to their business.

And, the c-suite, the board, the CFO, they are saying that it is critical for them to have scenario planning – almost daily scenario planning. They are looking for their tax departments to advise on the options to restructure, reorganise; the c-suite wants to know whether or not their current operating model is effective post-US tax reform as well.

The other thing that tax departments are under pressure to do is finalising what reform means for them. So, at the end of December 2017 companies were allowed to report in their financial statements the estimates of the impact of the financial reform; but as 2018 moves on, it is important that they finalise their estimate, that their effective rate guidance gets tighter. And that they really fine-tune what the true impact of reform is to their business.

So my recommendation to companies who are struggling with running scenario planning, optionality models for their CFO, getting data to comply with all of the new calculations, is to consider some of the latest technology on a data management solution for tax, to help them access the data they need, better governance and control over the data, and better real time data to do real time scenario planning for advising the c-suite as a strategic business advisor to their business in this new dynamic world of tax reform.