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8 | BUSINESS AND SOCIETY freshfields.com

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Donald Trump's proposals include a tax incentive to

bring cash otherwise trapped overseas back into the

US, and a rate cut designed to stimulate the domestic

economy and remove the incentive for inversions.

Even before the election the US had not signed up

to elements of BEPS. And many in Congress view

the EU's state aid investigations as evidence of

anti-Americanism. But cranking up the heat on

interstate tax competition threatens to undermine

the co-operation needed to embed tax reforms

on a global basis.

Falling tax rates threaten the business/society

relationship and put pressure on corporations to

articulate their societal contribution beyond their

payments to the state. The same will apply as

governments loosen the regulatory shackles.

Like the Brexiteers, Trump the candidate gained

traction by pledging to boost growth by cutting

regulation, and his appointment of Carl Icahn as a

special adviser on regulatory reform suggests less red

tape in future for domestic companies. Again this

appears at odds with the anti-elite surge that put him

in power, but Trump, too, seems to be banking on

the fact that an expanding economy will quell any

backlash. However, corporations will need to respond

carefully - failing to live up to society's expectations

invariably results in activist disruption, consumer

rejection, investor withdrawal and employee pressure.

Despite populists claiming to be implementing

'the will of the people', it's worth remembering

that both the Brexit vote and the US election split

the UK and US down the middle.

President Trump's pitch is that ordinary Americans

will prosper with a commander in chief who puts US

interests first ('bellicose isolationism' in the words

of the FT's Philip Stephens). Many expect his policies

to create growth (although America's manufacturers

will find the strong dollar a challenge) and if the

benefits trickle down then the relationship between

business and society may improve.

2013

US corporate profits

made abroad

Source: Gabriel Zucman, Journal of Economic Perspectives

(cited in the Financial Times)

One of Donald Trump's principal targets is offshore cash.

The amount of money made by US businesses from their direct

investments overseas has been rising for the past 30 years -

and the share of it made in low-tax jurisdictions has also been

growing. In Europe this has caught the attention of the EU

Commission and is what drove the development of the BEPS

proposals, which aim to tie taxation more closely to the places

where profits are made. It is also the motivation behind Donald

Trump's tax reforms, which aim to bring US corporates' offshore

cash back to the US. While the narratives differ - BEPS is

ostensibly about corporations paying their 'fair share' while

Trump is more interested in job creation - both are signs

of governments sending the message that borders matter.

1982

US corporate

profits made

abroad

58%

4

Multinationals

seem increasingly

stateless…

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