November 2, 2016
by Roger Russell
Tax uncertainty is an issue for businesses of every size in their outlook and planning for the year ahead.
Uncertainty regarding the impact of the election on taxes and the economy, the debt-equity regulations, new overtime rules, health care decisions, new partnership audit rules, captive insurance company rules, the effect of proposed estate tax regulations on small businesses, and the possibility of rising interest rates and the return of inflation are issues of concern in the minds of many business leaders as we approach a new year.
In Big Four firm Deloitte's Third Quarter CFO Signals survey, nearly two-thirds of surveyed CFOs said that corporate tax policy is a top-three priority, with monetary/rate policy second at 65 percent, and 30 percent citing international trade policy.
“The survey showed that CFOs see a benefit from certainty in the Tax Code,” said Jon Traub, managing principal of the Tax Policy Group at Deloitte Tax LLP. “Talk about tax reform creates uncertainty about what the code would look like tomorrow. The OECD's [Base Erosion and Profit Shifting] project is likewise an issue that creates uncertainty.”
Nearly 85 percent of CFOs believe that the future performance of their company depends at least somewhat on the outcome of the presidential election. U.S. election worries “skyrocketed” during the last quarter, and rose again this quarter, along with concerns around international trade and tax policy, according to the survey.
“Going forward, Congress has not been speaking about fixing the Tax Code for many years,” Traub said. “That creates a clear area of uncertainty, given the fact that they may do it in the year ahead.”
Many are hoping for change, but that depends on their business profile,” he observed. “For some, tax reform that simplifies the code will be a great help, but others view the process as one that will make them lose key credits and deductions. They don't speak with one voice — many will be better off, but many won't.”
“A great deal depends not just on who wins the election, but who controls the House and the Senate,” he said. “The question for policymakers is whether they can emerge from tax reform with enough of their policy and political objectives intact to make tax reform something that they can come to closure on.”