Dec 27, 2017
European banks warn of multibillion-dollar hit from Trump tax reform
Several of Europe's biggest banks are warning their investors to expect a multibillion- dollar hit from US president Donald Trump's tax reform, which will reduce their ability to deduct past losses against future tax bills. Its Swiss rival UBS has already estimated that it could suffer a SFr3bn hit from the US tax rewrite. Under current tax laws some of the biggest names in corporate America, including several of the largest US financial institutions, have been able to cut their tax bills significantly because they can use past losses to offset future profits. The Republican-led legislation to cut the corporate tax rate from 35 per cent to 21 per cent will sharply reduce the expected financial benefits and force the institutions to reassess the value of their "Deferred tax assets". The one-off charges on the value of deferred tax assets could disappoint investors who have been betting on bank shares, expecting them to benefit from the reduced tax rate in the US. The tax reform may carry an extra sting in the tail for foreign banks with sizeable US operations.
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