A single sentence in the nine-page tax plan proposed by U.S. President Donald Trump and congressional Republicans could have a multi-billion-dollar impact on U.S. businesses that structure their affairs through offshore centers.

Bloomberg News reported that while the stock market was lifted by plans to slash the corporate tax rate from 35 percent to 20 percent and cut rates for pass-through businesses and individuals, a little-noticed sentence on the last page of the document could reverse some of the effect.

“To prevent companies from shifting profits to tax havens, the framework includes rules to protect the U.S. tax base by taxing at a reduced rate and on a global basis the foreign profits of U.S. multinational corporations,” the proposal reads.

There is no mention of the exact tax rate or formulas to calculate what will be taxed. And details on how the U.S. administration aims to reform its international taxation regime are unclear.

Bloomberg quoted one tax expert suggesting that Congress would set a low tax rate of 15 percent and any company that paid more than that rate to a foreign government would not owe the international tax.

However, rather than reducing corporate tax avoidance efforts, the effect of the tax could well be more tax planning.

Edward Kleinbard, a tax law professor and former chief of staff for Congress’ Joint Committee on Taxation told Bloomberg News that “companies will double down on tax-planning technologies to create a stream of zero-tax income that brings their average down to that minimum rate.”

Because the tax would be calculated on a global basis, taking into consideration taxable earnings in each of a multinational’s operating locations, the effect may not be as severe as initially thought.

Under current U.S. tax rules, companies are taxed on their worldwide income. But corporations can take advantage of a rule in the tax code that allows them to defer paying corporation tax on their foreign earned income as long as they reinvest it overseas.

The Cayman Islands is one of the places used by U.S. multinationals to hold and reinvest profits that were earned outside of the United States.

If repatriated to the U.S., the earnings, which have already been taxed in the country where they originated, would be taxed again – typically at the difference between foreign and U.S. corporate tax rates.

Therefore, U.S. companies have no incentive to bring those earnings back to the U.S., especially not if they have opportunities to grow their operations internationally.

According to Bloomberg, the framework would allow multinationals to repatriate overseas earnings after paying a lower repatriation tax on foreign earned income, rumored to be around 10 percent.

But even if a multinational’s offshore holdings are not strictly needed for immediate reinvestment overseas, it may make little sense to repatriate the funds.

Firms like Apple find it generally cheaper to raise debt in the U.S. at a low interest rate rather than bring back some of its offshore cash and pay tax on it.

Cayman hires lobbying firm

Any tax reform successful at preventing U.S. firms from holding funds in offshore centers could drain significant funds from Cayman’s banking system and impact its corporate services market.

In response to these concerns, the Cayman Islands Ministry of Financial Services has hired law firm Baker Botts to provide counseling and advocacy services in Washington, O’Dwyer’s PR News reported.

The scope of the work will include outreach for the Cayman Islands government in relation to international taxation and public policy matters to U.S. officials, members of Congress, the Treasury Department and the White House, according to documents filed with the Justice Department in September.

Houston-based Baker Botts will received a fixed $12,500 fee for its services.

Last year the ministry retained San Francisco-based law firm Pillsbury Winthrop Shaw Pittman for similar outreach services, and to provide legislative and public policy advice about the ministry’s advocacy program in the U.S., O’Dwyer reported.

During the election campaign, Mr. Trump announced his tax plan would end the deferral of taxes on corporate income earned abroad and charge a one-time, 10 percent tax on cash held overseas.

He stated the goal was to halt the practice of U.S. multinationals holding hundreds of billions of dollars in offshore accounts to reduce their U.S. tax liability.

One year ago, President Trump told reporters “they think it is $2.5 trillion” in corporate cash that is held offshore. “I think it is much more than that and boy, if it is, we have hit pay dirt.”

Activist group Citizens for Tax Justice concluded in a March 2016 report that Fortune 500 companies alone avoided $695 billion in U.S. federal income tax on $2.4 trillion in offshore holdings in 2015.

An estimate by the nonpartisan Congressional Joint Committee on Taxation released in September of last year put foreign earnings held by U.S. corporations overseas at $2.6 trillion.

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