The new U.S. tax overhaul imposes a discounted one-time tax hit on resources held overseas — 15.5 percent for earnings held in cash or other liquid assets and 8 percent for earnings held in harder-to-sell assets.
US banks will be impacted at Q417 by changes in repatriation taxes as funds are returned from overseas plus the effects of the implementation of the territorial tax system and the revaluation of U.S. deferred tax assets at lower enacted corporate tax rates.
After taking a hit on repatriated earns, banks will operate in a more advantageous tax environment. Finance and insurance companies will now pay an effective corporate tax rate of 14.3% versus 26.1 percent according to the old system.
Will banks use this advantage to buy back shares?