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.
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
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.
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:
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.
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?
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.