Post-tax reform, US companies plan to pour tax savings into growth
It's not all about buybacks; for some, a geographic change-up is in the works. Our survey shows companies spreading tax savings across strategic initiatives.
A clearer picture on spending plans
A view is emerging on how companies plan to use the estimated net $1.45 trillion 10-year reduction in taxes from the 2017 US Tax Cuts and Jobs Act (TCJA). This includes a $280 billion estimate for 2019.
No matter the starting point—an acquisition strategy, long-term planning or accumulation of shareholder returns—tax reform is giving executives a chance to reset and match cash with strategic plans, according to our survey of 403 US CEOs, CFOs and COOs.
Nearly all executives we surveyed (89%) say they’re seeing tax savings and that these savings will have implications for how they run their businesses.
A competitive race? The potential is there, if even a small percentage of companies decide to invest more in acquisitions and strategic investments.
Gearing up to do more
Seventy-seven percent say that tax reform will make their company more competitive in the long term and seventy-eight percent say tax reform has made doing business in the US more attractive
Big shifts for where to do business
The effects are sweeping: 30% say they’re likely to make geographic changes as a direct result of tax reform, and another 34% are considering similar changes. This includes administrative offices, shared services, R&D centers, service points, manufacturing plants, and distribution centers.
These are big plans requiring business to holistically model potential costs. International provisions of the Act may interact, leading to unexpected results.
How leaders plan to spend tax savings
With so many options ahead of them, and habits of spending, we wanted to know what business leaders are thinking now as they balance short-term needs and long-term competitive positions. Here’s how they plan to spend:
Eight in ten plan to pump cash into growing stronger capabilities
Most are poised to spend on talent
Customers and markets should also see benefits
Key challenges: Will tax savings be used to build something new?
With so much cash on company balance sheets, US companies face competitive pressure to use the tax windfall strategically. Plans to allocate tax savings into next year look diverse, with few self-reported bold moves. While each company has different reasons why they make different spending decisions, what’s clear is that they have an opportunity that has not be given to any business leader in more than 30 years.
We believe strategic-minded executives will seize this opportunity and make bold investments ahead of their competitors.
The questions remain
Are you only driving incremental change, or are you positioning your organization to use tax savings to build something new and transformative?
Are you setting a bold vision and identifying the endgame tied to all of this spending?
Are you setting yourself up to win the race?
Survey methodology
PwC commissioned a leading market research firm to conduct an online poll of C-Suite executives in the US who are CEOs (154), CFOs (130), or COOs (119). The poll was conducted online from April 23rd through May 10th, 2018. Thirty-seven percent of participating executives lead companies with annual revenues of US $1 billion or more and 89% are headquartered in the US. This data is self reported and is for directional information only.
Contact us
Dr. Deniz Caglar
Principal, Strategy&, PwC US
Tel: +1 (312) 298 3902
Email
John Ranke
Partner, International Tax, PwC US
Tel: +1 (313) 394 3508
Email
Paul Leinwand
Global Managing Director, Strategy&, part of the PwC network, PwC US
Tel: +1 (312) 578 4573
Email
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