Metals & Manufacturing Outlook
The border adjustment portion of the House Republican Blueprint was developed without input from President Trump. However, the ideas put forth in this section are in line with the administration’s “America First” initiative. If the plan were to pass as envisioned today, border adjustability will prevent US companies from deducting the cost of raw materials or finished products that were imported into the United States. The example given in the PWC brief is as follows, “A US manufacturer that had been importing $800 worth of materials for a product it assembled in the United States and sold for $1,000 would no longer be able to deduct the $800 in costs from its income. It’s tax obligation would be calculated not off of the $200 profit – the difference between the receipts and
imported materials costs – but off of the full $1,000 it received for the product. In a world of 20% taxes, such a company would pay $200 instead of $40 in taxes.” http://pwc. to/2mtHpfD It is clear that some of the proposed tax reforms could have a dramatic impact on US manufacturers and their ability to compete globally. However, other areas in this legislation could create the need for manufacturers to reorganize their supply chain. PwC offers some advice at the end of the report. It will be important for manufacturers to expect answers to be complicated, these businesses must model the possible scenarios to ensure they can survive in
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the future and it’ll be critical for businesses to wait to see how the potential law progresses before reorganizing their company’s structure. Manufacturers in the United States are at a crossroads. These reforms could greatly improve the business environment within the US, making it much easier to thrive. However, only time will tell what actually ends up becoming law. Make sure to check back on Manufacturing Talk Radio again soon to keep up with the latest information coming out of the industry. We’ll be offering more details focused on tax and regulation reform as they become available.
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STEELFORGE.COM | March 2017