In 1986, the United States introduced the Tax Reform Act. It has been more than 30 years since the country once again implemented a large-scale tax reform.

There is much to explore about this phenomenon.

Its current tax system has many problems, is no longer able to boost economic growth, and has many loopholes that allow tax avoidance to occur frequently.

The tax reform implemented under such circumstances is aimed at rebuilding the United States' global attractiveness and competitiveness, which deserves attention.

U.S. tax reform is based on four important principles.

Previously, the U.S. tax system was too cumbersome and difficult to understand. Now it is simplified and more fair.

Secondly, tax cuts are an important measure, especially to increase the real income of American workers.

For example, the income of some low-income labor groups can actually increase.

In addition, it is crucial to create a fair competitive situation so that the United States can become a hot spot for global employment and attract many talents to work here. The impact will likely be most significant for emerging technology industries.

From a specific perspective, it will effectively change the economic landscape of various industries in the United States.

Different industries will have more development opportunities due to a more level playing field.

For example, the creative industry has been facing problems such as high tax burdens, and this reform is expected to improve them.

This time the U.S. tax reform bill is extensive, including changes in the tax system for individuals, businesses, multinationals and estates, and is more than a thousand pages long.

Personal income tax has an impact on every American citizen's income and daily consumption.

The reform of corporate income tax is related to the competitiveness and revenue capabilities of American companies.

Cross-border income tax affects economic exchanges between the United States and foreign countries and corporate decisions on foreign development.

Changes in inheritance tax involve major social issues such as wealth inheritance.

Taking corporate income tax as an example, technology companies and traditional manufacturing companies will make corresponding adjustments to their business strategies based on the newly introduced corporate income tax regulations.

For companies that rely on overseas markets, cross-border income tax adjustments are an important factor.

The U.S. economic structure is complex, so it is difficult to predict when the expected tax cuts will be transformed into growth of the real economy, thereby promoting the improvement of the economy and employment.

First, from the perspective of dynamic effects, it is difficult to fully estimate the impact of tax reform.

In the stock market, tax rate cuts and fiscal deficit reserve adjustments have quickly emerged in public psychological expectations.

Although corporate and personal income taxes have been reduced, in order to cover the fiscal deficit, some tax exemptions and deductions have to be considered to be canceled or modified.

This results in different groups being affected differently, and perhaps not all groups can enjoy tax cuts, especially large tax cuts.

Small and medium-sized business owners and self-employed individuals may be affected very differently from large enterprises.

The Joint Committee on Taxation of the U.S. Congress predicts that the final proposal will increase the federal fiscal deficit by US$1.456 trillion over the next decade and reduce government tax revenue. This is undoubtedly a powerful tax reduction measure.

However, this data does not take into account the dynamic effects of tax reform.

The conclusions drawn may change if the economic boost from tax reform and the resulting tax increases are taken into account.

Large infrastructure companies may benefit when the economy gets a boost from tax reform and the number of projects increases. However, they may also suffer from the negative impact of tax policy changes.

When Chinese companies develop overseas, they cannot just focus on the reduction of federal corporate income tax. In fact, when state and local taxes are also taken into account, the overall tax burden in the United States is about the same as that in China. Therefore, its appeal is not as strong as people think.

If a manufacturing company wants to expand into the United States, it is likely to change its plan after comprehensively calculating the tax burden.

Moreover, when companies expand their global footprint, they don’t just look at the tax system.

Many factors such as corporate strategy, market, and raw material supply must be considered.

At the same time, attention should also be paid to the anti-tax avoidance provisions of the final US bill.

The current legislation is only a starting point, and we still have to wait for the relevant US departments to issue specific measures. Only then will the impact of the US tax reform become clearer. When Chinese enterprises “go global”, they need to continue to pay attention and make prudent decisions.

How do you think Chinese “going global” companies should respond to the changes brought about by the U.S. tax reform?