George Boyd-Bowman, who co-manages the Neptune Global Income fund with Robin Geffen (pictured), argued the latest news from the Trump team was an exciting prospect, particularly from an income perspective.
He anticipates the reform will allow many large companies, several of which are held in the fund, to unlock money held overseas, some of which will find its way back in to dividends.
“There is almost $3trn on US company balance sheets that is waiting to be repatriated back to the US. Over the weekend, the national economic council director, Gary Cohn, talked about the potential cash repatriation deal that can be done and it was said to be in the 10% range which is in line with our thinking.”
‘America First’ tax
After keeping investors in suspense for eight months, details on Trump’s ‘America First’ tax plan were finally released last Wednesday.
It outlined three key elements: a cut in the basic corporate tax rate from 35% to 20%, a ‘repatriation tax’ to encourage companies to bring cash home and a plan that allows businesses to write off investments that may decline.
The current system ensures that companies are taxed 35% on all income, regardless of where it is earned. However, Trump’s new territorial system hopes to encourage the profit from overseas to return to the US.
Half of the overseas holdings of Geffen’s UK equity income fund are in the financial sector, an area which the Neptune income team will thrive under Trump’s tax initiatives.
“It is an exciting prospect and something to look out for over the next 12 months,” said Boyd-Bowman.
The chief White House economic adviser Gary Cohn and director of the National Economic Council, said during an interview with Sunday Morning Futures that the tax plan was about playing “catch up with the worldwide system”.
“We will end up with a bifurcated rate”, he explained.
“We will charge you one rate if you have liquid assets offshore. We will charge you a different rate if you’ve got bricks-and-mortar and you’ve turned those earnings into bricks-and-mortar or investments offshore. We will give you some period of time to pay it, but you will incur the tax liability the minute the tax referendum goes through.”
