"The US dollar is our currency, but it is your trouble." The famous saying of the international economy in the 1970s is welcoming the latest version, "Our tax reform, your troubles." After a long and difficult discussion and revision, on December 1, the Republican Party proposed a tax reform bill with a 51:49 vote than in the Senate. Although the "revolution has not been successful", Trump's tax reform is about to land, and the impact of global capital competition and tax spillovers triggered by tax reform will slowly begin.
"Reduction and Reduction Act"
In the past year, Trump finally ushered in his own "turning over". If the "revolutionary success", this bill will become the first real policy of the Trump administration, and the US Congress will also greet the first largest tax law revision in 31 years.
According to the current situation, Trump will officially sign the tax reform bill at the end of 2017. However, it is not the time for the Republican Party to celebrate. In the past, in order to obtain more support votes from the Senate, the Republican Party revised some of the details of the bill before voting, and eventually gave the officials a vote to vote for many handwritten amendments. .
Therefore, the tax reform version adopted by the Senate is different from the version adopted by the previous House of Representatives. Before Trump signed, the legislator needed to resolve the difference between the two versions of the bill passed by the House and Senate. Recently, the Senate and the House of Representatives will begin to resolve the differences between the two versions, and finally submit a bill to Trump.
No matter how the details are modified, the trend of “reduction and reduction” of this tax reform has been fixed. At the beginning of this tax reform, the Republican Party proposed the Better Way, which proposed the idea of collecting a cash flow tax based on consumption. The cash flow tax is based on the cash basis and allows the company to deduct the entire investment cost from the tax base without depreciation and implement “border adjustment” based on the place of consumption.
However, with the continuous reform of the tax reform plan, the Trump administration hopes to stimulate economic growth and reduce the taxation of enterprises and the public by reducing the income tax rate on a large scale. Therefore, this tax reform is a tax cut in terms of purpose, and Trump insists that it is called “Cut cut cut act”.
Compared with the existing tax system, this tax reform mainly has the following changes. First, the personal income tax rate has been reduced from seven to four, which is simplified compared to the previous one. Second, the corporate tax has fallen from the original 35% to 20%. Third, the inheritance tax will increase the threshold and will eventually be abolished. Fourth, the repatriation of overseas profits will enjoy a lower tax rate, from the original 35% to 5%-12%.
Tax reform "difficult to produce"
When Trump took office, he was eager to try the tax reform. However, after a long debate, the tax reform was “difficult to produce” for nearly a year. In fact, there are two main aspects of the most controversial tax reform.
First of all, because this rich tax reform will benefit more people, which will increase the unfair distribution and increase the gap between the rich and the poor. This is also the main reason why the Democratic Party opposes this tax reform. Indeed, this new tax new policy has reduced the tax burden of most people, but not every family benefits. High-income people will benefit a lot from the tax reform, while the middle class tax cuts are obviously not as good as the rich, and some middle-class families will even suffer losses.
Second, tax cuts may increase the fiscal deficit. According to forecasts, the tax reform measures of the Tax Reform Act will bring the US$1 trillion deficit to the United States, which has also become the focus of the previous stalemate. Conservatives in the Republican Party argue that the deficit is neutral, that is, there are tax cuts and tax increases. However, the tax reduction is difficult to add, and the increase in the deficit is almost a foregone conclusion. In this regard, Trump claims that although the tax rate is reduced, due to tax cuts to promote economic development, it will not bring too high a fiscal deficit.
According to TPC forecasts, due to this tax reform, US federal revenue will decrease by 2.4 trillion to 2.5 trillion US dollars in 2017-2027 and 3.4 trillion US dollars in 2027-2037. This will increase the US budget deficit by $1.5 trillion over the next decade. If you want to guarantee the deficitGDPThe ratio remains unchanged, and the US GDP growth rate needs to reach 4.5%. However, the US Congressional Budget Office estimates that the potential growth rate of GDP is only about 2%, even if it takes into account fiscal stimulus policies, it will reach less than 3%. Therefore, this tax reform has a high probability of increasing the US fiscal deficit.
Although the debate over the Trump tax reform is still going on, it has not really hindered the pace of this tax reform. The reason is that this tax reform will bring huge investment and consumption promotion to the United States, and the purpose of "US priority" will inevitably attract the return of capital.
In terms of investment, reducing corporate income tax to 20%, increasing corporate retained profits will stimulate investment; while allowing short-term capital investment as operating expenses to offset income, without depreciation, is equivalent to reducing tax burden and promoting investment. However, although the original corporate tax rate in the United States is as high as 39.6%, this does not mean that the actual tax rate of enterprises is so high.
Companies with higher effective taxes are more likely to benefit from lower corporate taxes. The companies can be broadly divided into two categories: one is a company with a high proportion of local income and a high effective tax rate, such as telecommunications and medicine. The second is small and medium-sized companies. For most industries, large companies are better able to plan their taxes properly, so this tax cut will benefit small and medium-sized enterprises.
In the development of Trump's tax reform, the belief that "US priority" runs through, Trump claims that this tax reform is once again giving priority to the United States. This is the best proof of the sharp drop in the overseas profit return tax rate. According to UBS (17.52, 0.34, 1.98%), in 2016, US companies hoarded overseas profits of up to 2.5 trillion US dollars. Therefore, the reduction of overseas profit repatriation tax rate is expected to bring about a large amount of overseas profit repatriation and local investment. . And investment will play a multiplier effect to promote economic growth.
The Trump tax reform took the lead and moved all over the body. As the world's largest economy, such a major tax reform policy in the United States is bound to have a linkage effect on the global capital market, and the first to bear the brunt is to lead the global tax cuts. At the time of the tax reform bill, the German and French countries issued a statement saying that the move would have a serious impact on domestic enterprises and made it clear that they could not accept the "being of teammates."
If the Trump tax is changed, the world's major economies will inevitably follow up on tax cuts – in the case of lower taxes in the United States, if other countries maintain the original tax rate, the profit-seeking capital naturally Investment in a lower-cost market will be chosen, while other countries will face capital loss, reduced investment, and a range of economic problems.
At present, for the Trump tax reform, many countries have begun to introduce tax cuts to deal with. For example, the UK announced that it will cut its corporate tax to 17% by 2020, and the Modi government in India has introduced reforms such as tax cuts for individuals and small and medium-sized enterprises.
According to KPMG's research, the challenge of the tax reform of the House of Representatives to the global tax system coordination and the international industrial chain cannot be underestimated. If this version of the bill eventually becomes law, it may force many current bilateral and multilateral tax treaties. Adjustment.
This tax reform will also have a greater impact on China. US tax cuts encourage investment and may attract more Chinese companies to invest abroad. In 2014, China’s corporate income tax accounted for 3.8% of GDP, compared with 2.6% in the United States. If the US further cuts taxes, it is expected to stimulate Chinese companies to invest abroad. China's direct investment in the United States is invested in advanced manufacturing, consumption and high-tech industries. These major industries are also industries that have benefited greatly from this tax reform.
Despite this, China, as the world's second-largest economy, will have a big impact on China. For example, the US tax cuts will cause a depreciation of the US dollar against the US dollar, and it may also have an impact on exports. China’s short-term liquid capital outflow pressure will increase,foreign exchange reservesThere will be adverse effects.
If a new wave of global tax cuts is formed in the future and other developing countries also cut their corporate income tax rates significantly, then China will face severe challenges.
However, for the capital market, the tax rate is only one of the influencing factors, as well as a series of factors such as market potential, institutional environment, technological innovation, labor costs, energy and other comprehensive costs. Therefore, analysts say that the role of lowering tax rates should not be exaggerated.
Impact: 1) For the United States: the US deficit, debt and economy will accelerate. 2) For the Chinese economy, the successful tax cuts in the United States will drive its economic recovery and thus benefit China's exports to the United States, which in turn will drive China's manufacturing investment, especially for high-end equipment manufacturing. 3) In the short term, capital will not return to the United States from China. On the one hand, China is still actively promoting tax cuts and fee reductions in recent years. On the other hand, China's labor costs still have advantages over the United States. 4) US tax cuts are indeed putting pressure on China's fiscal policy, especially tax cuts. In recent years, China has been reducing taxes and constantly improving the tax system. The current US macro tax burden is still slightly higher than China. The next stage: the reform of the combination of the comprehensive and classified income tax is expected to be implemented. The integration of various grades of VAT rates and the reduction of tax rates will also have a tax reduction effect.
Qianhai open source Yang Delong said that Trump's tax reform plan was approved by the US Senate. According to Trump's tax reduction plan, the tax reduction and exemption will be about 1.4 trillion US dollars in the next 10 years, which will have a significant stimulating effect on the US economy. . The tax cuts have passed the elimination of uncertainty and increased corporate earnings expectations, which may trigger further US stocks to lead the global bull market to accelerate. The MSCI ACWI global stock index recorded its 13th consecutive increase for the first time in 30 years, with a cumulative increase of 21.3%. since this yearGlobal stock marketFlowering everywhere, showing the most significant general market in recent years, in contrast, China's stock market performance is backward, and the demand for compensatory growth is strong. The US tax cuts have stimulated a faster recovery of the US economy and boosted China’s export growth to the United States. It is expected that in 2018, the A-share slow cattle market will continue.
Li Dazhao, director of the Institute of Securities Research, said that this is a major adjustment of the US tax policy. Its tax reduction is the largest in the history of the United States. It is a major victory since President Trump took office and has a significant stimulating effect on promoting US economic growth. It also has a positive impact on the global economy. This move is also an important driver of the strength of the US stock market and has a positive impact on the global stock market.
The Yangtze River macro-receipt analysis team believes that the import growth rate of the three rounds of tax cuts in the history of the United States has risen sharply.
In 1981, 1986, and 2001-2003, the United States implemented three rounds of tax reduction policies. After each round of tax cuts in the United States, domestic private consumption and investment growth rates have risen significantly. Driven by improved domestic demand, US import growth has risen sharply, including a significant expansion in imports of minerals, chemicals and machinery. During the tax cut period, driven by US demand, the export growth rate of major global production countries has improved substantially. Under the global value chain division system, the consumer countries represented by the United States provide demand, while the producing countries represented by China, Germany and Japan are responsible for production.
Therefore, if the current round of tax reductions is implemented, the export growth rate of China's machinery and electronics, chemical products, plastics and rubber, basic metals and instrument production industries will rise significantly. On the one hand, after the tax cuts in the United States in 2001, corresponding to the improvement in the import of the US industry, Germany and Japan's exports to the US machinery and electronics, chemical products, plastics and rubber, basic metals and instrument production industries expanded significantly. On the other hand, since 2001, China's competitiveness in the above-mentioned industries has increased substantially, and the proportion of imports in the above-mentioned industries in the United States has basically exceeded that of Germany and Japan. Therefore, if the current round of tax cuts, the export of China's machinery and electronics, chemical products, plastics and rubber, basic metals and instrument production will be significantly improved.
Founder's consolidation of Yang Weizhen believes that this will not lead to too much capital outflow, nor will it exert too much pressure on the exchange rate. He further stated that the pressure on RMB depreciation will definitely rise, but it will not lead to a sharp depreciation of the exchange rate. The reason is that the domestic exchange rate formation system has undergone a counter-marketization reform in May this year. Exchange rate fluctuations are re-limited, even theninterest rateParity will put pressure on the RMB exchange rate, and there will not be much depreciation losses. Yang Weizhen said that there may be more domestic enterprises going to sea, but it will not be too intense and will not have much impact on monetary policy. The current key issue of monetary policy is still domestic, and the bond market is also affected.
CITIC SecuritiesThe analysis believes that the Trump tax reform bill was finally approved by the Senate. This is the biggest adjustment in the US tax law for more than 30 years. It is also the first victory for Trump to implement the economic stimulus policy after taking office, in line with market expectations. The tax reform bill was finally passed, and the impact on capital flows in the short term may be more significant, which is good for the US dollar and US stocks.
The US dollar index will be relatively strong for at least half a year. On the one hand, most of the tax reforms on economic stimulus and capital reversal may occur in 2018, pushing up economic growth expectations and inflation expectations, and the Fed is likely to accelerate the pace of tightening; on the other hand, the ECB started to cut QE in 2018 at least half a year later. In the face of the monetary policy vacuum period, the market's interest rate hike expectations for the European Central Bank will not appear until the end of 2018. It should be noted that the weakening of the US dollar is one of the important factors for the sharp rise of global risk assets in 2017. In 2018 (at least the first half of the year), the US dollar may be relatively strong, combined with the expected economic and inflation expectations after the introduction of the tax in the first quarter. Positively boosted, the Fed may transfer the monetary policy stance of the hawks to the market in the first half of 2018, which will put some pressure on the medium-term asset prices. In the short-term, the adoption of tax reform will help boost market confidence. The decline in corporate tax rate will help increase earnings per share, and resolve the current valuation pressure on US stocks. The return of funds may also stimulate enterprises to increase investment, distribute dividends and buy back, and benefit US stocks.
Essence Securities believes that this bill will further promote the US economic recovery and boost the global economy, which is conducive to China's expected export growth. China has previously proposed a supply-side reform around “three to one, one reduction and one supplement”. We believe that in addition to “cost reduction”, in addition to the current housing rent cost problem, corporate financinginterest rateAnd other companies will further implement the burden in the future.
In the current position, investors have reason to be more active in watching the market. From a structural point of view, the fundamentals of the cyclical stock supply end (capacity limited, low inventory, strong spot price) have never changed, and the demand is expected to have a certain transaction value in the short-term after repair, from the mid-term perspective of the continuous holding of the cross-year layout. We are more optimistic about technology stocks.
In terms of investment strategy, it is recommended to pay attention to configuration.Insurance, aviation, electronics, communications, chemicals, etc. The theme focuses on semiconductors, smart manufacturing, Xiong'an, Hainan, etc. A direction worthy of medium-term attention: "China Core" (SMIC,Violet Guoxin,Zhongke Shuguang,Changjiang Electronics TechnologyEtc.), artificial intelligence (Keda News,NavInfoEtc.), 5G/Internet of Things (ZTE,Yitong CenturyEtc.), intelligent manufacturing (Yellow River whirlwind,Huichuan TechnologyEtc.), military-civilian integration (Reiter,Tianyin Electrical and Mechanicaland many more.
(Original title: US tax reforms have fired the "outflow" war)