Latest news with #foreigninvestment
Yahoo
15 hours ago
- Business
- Yahoo
The ‘revenge tax' is dead before it even started
The Treasury Department and Congress on Thursday moved to kill a so-called revenge tax that was set to raise taxes on foreign investment and had spooked Wall Street and global business leaders. Treasury Secretary Scott Bessent on Thursday announced a deal with G7 partners that will exclude US companies from some global taxes in exchange for the US dropping Section 899 from Republican's 'One Big Beautiful Bill Act.' Bessent said in a post on X that he would ask Congress to remove Section 899 from the budget bill. Senator Mike Crapo and Rep. Jason Smith, who co-chair the joint committee on taxation, said in a statement Thursday that following Bessent's request, they would remove Section 899 from the bill. Section 899 was a tax code tucked in to President Donald Trump's budget bill that would have raised taxes on the income earned from US assets held by individuals or businesses in other countries with taxes the US perceived as unfair for American businesses. The provision would 'facilitate penalty taxes on foreign companies operating in the US if their home country is deemed to have a 'discriminatory' tax system,' analysts at Citi said in a note. The tax code was considered a 'revenge' tax because it was designed to retaliate against a global tax framework agreed upon in 2021 by the Biden administration and the Organization for Economic Cooperation and Development, according to Mark Luscombe, principal federal tax analyst at Wolters Kluwer. Former Treasury Secretary Janet Yellen had negotiated a tax agreement with other OECD countries that included setting a global minimum tax rate of 15%. Republicans had opposed the agreement and thought it was unfair, arguing it ceded authority on taxation, Luscombe said. The 'revenge tax' also was set to retaliate against digital services taxes, or taxes on US tech companies that provide services to users in other countries. Digital services taxes were perceived as 'discriminatory' by the Trump administration, said James Knightley, chief international economist at ING. Trump had previously signed an executive order on his first day in office announcing that tax deals agreed upon between the Biden administration and the OECD were null. Bessent's announcement leaves room for how the United States and other countries might negotiate on taxes. 'The Trump Administration remains vigilant against all discriminatory and extraterritorial foreign taxes applied against Americans,' Bessent said in his post on X. 'We will defend our tax sovereignty and resist efforts to create an unlevel playing field for our citizens and companies.' The so-called revenge tax, which had stirred debates on Wall Street and law firms across the Atlantic, is moot before it even went into effect. There had been back-and-forth debates in recent weeks about the implications of Section 899 and whether it would push global investors away from the United States. The provision had sent shivers up Wall Street's spine as it appeared to be another protectionist policy that would penalize global investors who put their money in the United States. 'Great concern had been expressed by Wall Street and affected stakeholders about the enactment of Section 899 and its impact on foreign investment in the United States, particularly in view of its complexity, potential scope of application and compliance obligations,' attorneys at law firm Holland & Knight said in a note. 'Those concerns have been alleviated for now.' International business groups were in Wasington in recent weeks negotiating with lawmakers. Jonathan Samford, CEO of the Global Business Alliance, which opposed Section 899, told CNN the provision would have 'squandered opportunity and more investment' and contributed to 'further isolation.' 'We're very pleased that President Trump and the administration have pursued this negotiation, and as a result, called for withdrawal of this punitive and discriminatory provision,' he said. 'I commend Chairman Smith and Chairman Crapo for focusing on making the United States the most competitive it can be.' Republicans this week had begun hinting that Section 899 might be negotiable. Director of the National Economic Council Kevin Hassett said in an interview with Fox Business on Wednesday that Section 899 might not be included in the final budget bill. 'You can try to retaliate, but it's probably better to work out an agreement than just have a tax fight, just like we're having tariff fights,' Luscombe said. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNN
18 hours ago
- Business
- CNN
The ‘revenge tax' is dead before it even started
The Treasury Department and Congress on Thursday moved to kill a so-called revenge tax that was set to raise taxes on foreign investment and had spooked Wall Street and global business leaders. Treasury Secretary Scott Bessent on Thursday announced a deal with G7 partners that will exclude US companies from some global taxes in exchange for the US dropping Section 899 from Republican's 'One Big Beautiful Bill Act.' Bessent said in a post on X that he would ask Congress to remove Section 899 from the budget bill. Senator Mike Crapo and Rep. Jason Smith, who co-chair the joint committee on taxation, said in a statement Thursday that following Bessent's request, they would remove Section 899 from the bill. Section 899 was a tax code tucked in to President Donald Trump's budget bill that would have raised taxes on the income earned from US assets held by individuals or businesses in other countries with taxes the US perceived as unfair for American businesses. The provision would 'facilitate penalty taxes on foreign companies operating in the US if their home country is deemed to have a 'discriminatory' tax system,' analysts at Citi said in a note. The tax code was considered a 'revenge' tax because it was designed to retaliate against a global tax framework agreed upon in 2021 by the Biden administration and the Organization for Economic Cooperation and Development, according to Mark Luscombe, principal federal tax analyst at Wolters Kluwer. Former Treasury Secretary Janet Yellen had negotiated a tax agreement with other OECD countries that included setting a global minimum tax rate of 15%. Republicans had opposed the agreement and thought it was unfair, arguing it ceded authority on taxation, Luscombe said. The 'revenge tax' also was set to retaliate against digital services taxes, or taxes on US tech companies that provide services to users in other countries. Digital services taxes were perceived as 'discriminatory' by the Trump administration, said James Knightley, chief international economist at ING. Trump had previously signed an executive order on his first day in office announcing that tax deals agreed upon between the Biden administration and the OECD were null. Bessent's announcement leaves room for how the United States and other countries might negotiate on taxes. 'The Trump Administration remains vigilant against all discriminatory and extraterritorial foreign taxes applied against Americans,' Bessent said in his post on X. 'We will defend our tax sovereignty and resist efforts to create an unlevel playing field for our citizens and companies.' The so-called revenge tax, which had stirred debates on Wall Street and law firms across the Atlantic, is moot before it even went into effect. There had been back-and-forth debates in recent weeks about the implications of Section 899 and whether it would push global investors away from the United States. The provision had sent shivers up Wall Street's spine as it appeared to be another protectionist policy that would penalize global investors who put their money in the United States. 'Great concern had been expressed by Wall Street and affected stakeholders about the enactment of Section 899 and its impact on foreign investment in the United States, particularly in view of its complexity, potential scope of application and compliance obligations,' attorneys at law firm Holland & Knight said in a note. 'Those concerns have been alleviated for now.' International business groups were in Wasington in recent weeks negotiating with lawmakers. Jonathan Samford, CEO of the Global Business Alliance, which opposed Section 899, told CNN the provision would have 'squandered opportunity and more investment' and contributed to 'further isolation.' 'We're very pleased that President Trump and the administration have pursued this negotiation, and as a result, called for withdrawal of this punitive and discriminatory provision,' he said. 'I commend Chairman Smith and Chairman Crapo for focusing on making the United States the most competitive it can be.' Republicans this week had begun hinting that Section 899 might be negotiable. Director of the National Economic Council Kevin Hassett said in an interview with Fox Business on Wednesday that Section 899 might not be included in the final budget bill. 'You can try to retaliate, but it's probably better to work out an agreement than just have a tax fight, just like we're having tariff fights,' Luscombe said.
Washington Post
a day ago
- Business
- Washington Post
Exploding U.S. indebtedness makes a fiscal crisis almost inevitable
Jamie Dimon, the CEO of JPMorgan Chase, was more tantalizing than illuminating when he recently said, regarding the nation's fiscal trajectory, 'You are going to see a crack in the bond market.' Details, even if hypotheticals, would be helpful concerning the market where U.S. debt is sold. Twenty-five percent of Treasury bonds, about $9 trillion worth, are held by foreigners, who surely have noticed a provision in the One Big Beautiful Bill (1,018 pages). Unless and until it is eliminated, the provision empowers presidents to impose a 20 percent tax on interest payments to foreigners. The potential applicability of this to particular countries and kinds of income is unclear. It could be merely America First flag-waving. But foreign bond purchasers, watching the U.S. government scrounge for money as it cuts taxes and swells the national debt in trillion-dollar tranches, surely think: What the provision makes possible is possible. Such a significant devaluation of foreign-purchased Treasury bonds would powerfully prod foreign investors to diversify away from Treasurys, which would raise the cost of U.S. borrowing an unpredictable amount. Concerning which, Kenneth Rogoff is alarmingly plausible. Before he became an intergalactically famous Harvard economics professor, and a peripatetic participant in global financial affairs, he was a professional chess player. Hence his penchant for thinking many moves ahead. 'I have observed that, although the financial system evolves glacially,' he writes in his new book 'Our Dollar, Your Problem,' 'the occasional dramatic turn is to be expected.' What is expected is considered probable. The nation's exploding indebtedness could presage a 'dramatic turn.' 'The amount of marketable U.S. government debt,' Rogoff says, roughly equals 'that of all other advanced countries combined; a similar comparison would hold for corporate debt.' Furthermore, when in 2023 Silicon Valley Bank and some other small and medium-size banks became actuarially bankrupt because of rising interest rates, the Federal Reserve created a facility that implicitly backstopped potential capital losses of all banks, estimated to be more than $2 trillion. The facility has gone away, but the mentality that created it remains. Therefore, so does another potential large increase in government debt. 'The U.S. government has continually increased the size and scope of its implicit bailout guarantees,' Rogoff writes, 'creating what might be termed 'the financial welfare state.'' Those of the 'lower forever' school of thought regarding interest rates are serene about the challenge of servicing the national debt. Rogoff, however, notes that when Ben Bernanke left as Federal Reserve chair in 2014, Bernanke, then 60, 'reportedly began telling private audiences that he did not expect to see 4 percent short-term interest rates again in his lifetime.' Eight years later, such rates reached 5.5 percent, and long-term rates have risen significantly. Rogoff thinks today's higher rates are likely the new normal, resembling the old normal, for many reasons, including 'the massive rise in global debt (public and private).' And 'if the worldwide rise in populism leads to greater income redistribution, that too will increase aggregate demand, since low-income individuals spend a higher share of their earnings.' This would be an inflation risk. Rogoff warns that many believers in 'lower forever' interest rates express the human propensity to believe in a 'supercheap' way to expand 'the footprint of government.' The nation is, however, 'running deficits at such a prolific rate that it is likely headed for trouble.' He rejects 'lazy language' about U.S. government debt obligations being 'safe.' Debt is a temptation for inflation, which is slow-motion repudiation of debt compiled in dollars that are losing their value. (Ninety percent of U.S. debt is not indexed for inflation.) When President Franklin D. Roosevelt abrogated the gold standard backing the currency, the Supreme Court ruled it a default. Also, holders of U.S. bonds were not safe from significant losses during this decade's post-pandemic inflation, or from huge losses during the 1970 inflation. Investors watching U.S. fiscal fecklessness might increasingly demand debt indexed to inflation. 'How sure are we,' Rogoff wonders, 'that no future president would seek a way to effectively abrogate the inflation link out of frustration' that it impeded 'partial default through inflation.' A president could call this putting America first. Projecting the exact arrival of an economic crisis is, Rogoff writes, 'extremely difficult,' an uncertainty shared with medicine. Physicians can identify factors that increase risks of heart attack in patients who nevertheless escape them. And low-risk patients can suffer attacks after being deemed fit as fiddles. Still, today reasonable fiscal physicians discern not just a risk but a high probability of a debt and/or inflation crisis.
Times
a day ago
- Business
- Times
Foreign investment in UK falls 11% to record low
The number of foreign investment projects into the UK fell by more than 11 per cent to a record low in 2024. According to the Department for Business and Trade, there were 1,375 inbound foreign direct investment (FDI) projects into the UK in 2024, an 11.6 per cent fall from 2023 and the lowest number since 2007, when the government started recording the figure. The number of jobs created in the UK through FDI fell by 3 per cent to 69,355 and the number of existing jobs safeguarded through FDI decreased by 12 per cent to 10,195. The Labour government has attempted to present the UK as a prime location for foreign investment over the past year with mixed success. Its international investment conference in October was overshadowed by a row with DP World, the owner of P&O Ferries. Louise Haigh, the transport secretary, called for a boycott of P&O Ferries and described it as a 'rogue operator' weeks before DP World had been due to announce a £1 billion investment into its London Gateway container port. Haigh's comments put the investment in jeopardy and DP World was said to have considered reviewing it and postponing its announcement, although it did ultimately go ahead. Rachel Reeves, the chancellor, and Jonathan Reynolds, the business secretary, have also sought to court foreign investment on trips to China and the Gulf states, respectively. The proportion of inbound FDI projects in the UK that were supported by the business department also fell from 65 per cent in 2023 to 61 per cent in 2024. The total economic impact of the supported projects was estimated to be roughly £6 billion. At the same time the number of FDI projects considered to be new investment projects fell by 20 per cent, from 1,023 in 2023 to 815. The number of projects considered to be either expansion projects or mergers and acquisitions increased by 4 per cent and 7 per cent, respectively. The United States accounted for 329 FDI projects in 2024, more than any other country, followed by India, which was responsible for 106 projects, and Germany, which accounted for 83 projects. The software and computer services sector had the most FDI projects with 257, followed by financial services and then advanced engineering.
Telegraph
a day ago
- Business
- Telegraph
Foreign investment in Britain falls to record low under Labour
Foreign investment into Britain plunged to a record low last year, despite a drive by ministers including Rachel Reeves and Jonathan Reynolds to drum up cash overseas. The number of inbound foreign direct investment (FDI) projects dropped to 1,375 last year, down 12pc from the 1,555 in 2023-24, according to data from the Department for Business and Trade. It represents the lowest level on records dating back to 2008. The investments created 69,355 jobs last year, the department said, the smallest number since the pandemic year of 2020-21. The figures underline the challenges faced by the Government as it seeks to attract international cash to Britian. Ministers have tried to present the UK as a prime location for business, including by hosting a high-profile International Investment Summit in October that featured a speech from Sir Keir Starmer and a performance by Sir Elton John. Other efforts include the Chancellor's trip to China in January, intended to revive economic links, and the Business Secretary's tour of the Gulf states to try to improve relations with nations with significant sovereign wealth funds. Relations with the Gulf states were harmed in September when then-transport secretary Louise Haigh called P&O Ferries a ' rogue operator ', an accusation that risked £1bn of investment in Britain by the company's owner, Dubai's DP World. The political and legal wrangling over the UAE's bid to become a partial owner of Telegraph Media Group has also affected Britain's reputation in the region. Joe Marshall, the chief executive of the National Central for Universities and Business, said the quality of the FDI coming into Britain was also deteriorating. 'The latest data is particularly concerning in high-value, strategically important sectors,' he said. 'The UK saw a 43pc drop in creative and media projects, a 20pc fall in life sciences, biotechnology and pharmaceuticals, and a 5pc decline in ICT investments – all vital to driving productivity, digital transformation and industrial modernisation. FDI into research and development also fell by 26pc. 'FDI is not just capital – it brings global talent, international partnerships, and long-term confidence in the UK economy. Strengthening investment will be essential to deliver the Industrial Strategy and realise the UK's ambition for innovation-led growth.' American investors accounted for the largest share of FDI in Britain last year, accounting for 329 of the projects. Another 106 came from India, 83 from Germany and 68 from France. Some major global investors have praised the UK in recent months, boosting Labour's efforts to improve Britain's standing on the global stage. Larry Fink of BlackRock called the UK 'undervalued' and said his company was investing 'across the board'. Jamie Dimon, the chief executive of JP Morgan, praised the Government's 'pro-growth agenda', while Jon Gray, the president of Blackstone, said there were 'encouraging' signs. The Government said it is focused on bringing investment into the country. A spokesman said ministers were 'laser-focused on targeting the highest-impact, job-creating wins across the UK, which is why the value of our FDI projects has gone up over the past year as we seek quality over volume. 'Our modern Industrial Strategy has introduced ambitious plans to drive growth and investment across every nation and region of the UK, ensuring our country is the best place to invest and do business. 'We've secured well over £100bn of investment over the past year, showing our Plan for Change is already delivering, and we'll continue to work with business to ensure we're making working people better off.' The FDI figures were published alongside separate data showing that British businesses were struggling as the economy weakens. Some 17pc have no cash reserves to rely on, the highest share since the Office for National Statistics began this quarterly survey in 2020.
