US tax cuts could create big problems for China

US tax cuts could create big problems for China

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According to Caixin, China may have to raise personal income tax and finally introduce a real estate levy to create room to cut corporate taxation amid concern that legislation going through the US Congress could make the country less attractive as an investment destination and potentially lead to capital outflows.

The US Senate on Saturday narrowly passed what would be the largest tax overhaul in America since the 1980s, which  could cut the corporate tax rate to 20% from 35%. The legislation would also give US companies a one-off tax cut on repatriating deferred profits held overseas and make dividends received from companies overseas exempt from tax. Future foreign profits of US-based companies would also be largely exempt from taxation, while businesses investing capital brought back into the country would receive tax breaks. The reform has triggered worldwide concern over the potential impact on business, investment and tax rates in other countries.