Both the U.S. Senate and House of Representatives are working on efforts aimed at delivering tax reforms which will see the corporate tax rate reduced to 20%. In his campaign for the presidency Donald Trump regularly claimed that the tax rate in the United States was one of the highest in the world and that this needed to go down in order for the country’s economy to remain globally competitive.
However after a couple of deductions the actual tax rate is usually under 35% and in most cases under 20%. In the case of Apple the reported average tax rate for the last three years has been around 25.5% though the actual percentage that the tech giant has paid in the last three years has been under 20%.
Actual tax rate
Cisco’s reported tax rate has been 16.9% and in the last two years the actual tax rate has hovered under 20%. In the case of Alphabet 20% was the reported tax rate in the last two years while the actual tax rate has been under 20% in the last three years. Last year the actual tax rate was just 6.8%.
Microsoft’s reported tax rate in 2015 was 34.1% but it fell to under 8.4% in the 2017 fiscal year. The largest software maker in the world does not however report the amount it pays in cash. Enterprise software maker Oracle reported tax rate as well as actual tax rates has been hovering slightly above 20% in the last three years though in the 2017 fiscal year the rate fell to under 20%.
But even as the U.S. Congress continues working on reforming tax laws, a poll conducted by Reuters shows that the respondents who were economists expressed skepticism over the ability of the reforms to boost economic growth. On Thursday the U.S House of Representatives approved a bill which lowered tax rates but which will raise the deficit by close to $1.5 trillion in a decade.
Close to two-thirds of the economists who were polled also said they were pessimistic that the bill will be passed within the timelines laid out. Some of them also expect the tax reforms to be watered down if and when the legislation is passed.
“We feel that if it does pass next year, it is likely to be less ambitious and more focused on temporary cuts than reform,” wrote Ajay Rajadhyaksha, Barclays’ macro research head, in a note.