As all of us invest to comprehend and implement the 2017 Act, it is equally important to understand its impact from a Macro perspective, I think this latest Reform is a Game Changer for Effective Tax Rate (ETR) management for a US-based Multinational.

Since the enactment of the US Tax Deferral regime, ETR has been largely driven by a mix of earnings from various geographical locations.  A company was incentivized to place operations and/or assets at low tax location to drive down ETR, but often at the cost of cash flow constraints since funds were often needed in the high tax locations.  In the post-Tax Reform world, most income are taxed in the US but under numerous different categories.  Going forward, the ETR will be increasingly driven by optimization of operations under these US taxable income categories.  Geographical location remains a factor, and equally important is the nature of the income.

I think skill sets for an effective tax professional will evolve:

1. Deep operational knowledge of the businesses they advise on is more critical than ever. I believe the demand for in-house professionals will grow, and the consulting firms will be increasingly industry-aligned.
2. Sarbane Oxley increased the demand for tax accounting skills, and changed staffing needs all the way to the Head of Tax. Similarly, ETR management in the new era requires extensive analytical modeling.  I believe Tax professionals who are Excel Whizzes and have business forecast experiences will be coveted.

Have a question about corporate tax? Contact Steven Shee.