RGA execs weigh up on impact of looming US tax reform
The US government is planning a tax reform which is likely to lower corporate taxes, potentially boosting companies’ profits. But executives at Reinsurance Group of America (RGA) remain cautious.
The US may reduce its federal corporate tax rate to around 15-25 percent. Currently, the US has some of the highest corporate tax rates in the world at 35 percent, nearly double the UK rate of 20 percent.
“In general, a tax rate reduction would be a positive for RGA,” said Anna Manning, president and CEO of RGA on the reinsurer’s Jan. 31 fourth quarter analyst call. “But we have to consider it in combination with other proposed changes, so changes that may impact the tax base, such as the border adjustment as well as changes potentially to the territorial system."
A border adjustment tax (BAT) could radically change the way companies are levied, taxing imports and exempting exports. Although US companies pay 35 percent tax on profits generated in the US, it is only payable on profits made outside the US when those profits are repatriated. For this reason, large amounts of foreign earnings never make it to the US.
“There are just too many moving parts at this point and we don’t have enough detail on the tax reform package to really understand what it could mean to us,” Manning said.
When asked during the call if a change in the tax rate could boost RGA’s business, Manning said: "There are many reasons and motivations for business to be put to market. Some may be tax motivated, some depending on the attributes of the organisation, or the actual business, may actually be harmed with a lower tax rate all else being equal. So again, I would say until we have better information on what those changes look like, we would just be speculating.”
A border adjustment tax could impact the reinsurance business in Bermuda. But Todd Larson, chief financial officer of RGA, suggested that these changes would not have a meaningful effect on the company’s operations.
Noting that RGA also has companies in Barbados in addition to Bermuda, Larson added: “Most of those companies are actually US taxpayers. Whatever we would enjoy from the US based companies that are US taxpayers they would see similar benefits or similar implications depending on where the tax reform goes.”
Did you enjoy reading this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
Already registered?
Login to your account
If you don't have a login or your access has expired, you will need to purchase a subscription to gain access to this article, including all our online content.
For more information on individual annual subscriptions for full paid access and corporate subscription options please contact us.
To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.
For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk
Editor's picks
Editor's picks
More articles
Copyright © intelligentinsurer.com 2024 | Headless Content Management with Blaze