The tax proposed in Section 899 raises concerns among business groups in the US, who view it as a threat to the economy.
Overview of the Foreign Investors Tax
Section 899 of the proposed tax bill imposes a progressive tax burden on foreign companies operating in the US, with a maximum rate of up to 20%. The tax aims to penalize foreign countries that the US considers to impose unfair taxes on digital services.
Company Concerns
Business groups express fears that this new tax could negatively impact the investment climate. David McCarthy, managing director at the CRE Finance Council, noted that it could depress real estate values due to a shortage of funds for property purchases. A spokesperson for the Investment Company Institute stated, "We encourage the Senate to make this provision more targeted to disincentivize foreign investment in the US."
Investment Pause
According to the US Treasury International Capital Reporting System, foreign investors hold nearly $40 trillion in US assets. Section 899 could raise taxes on dividends and interest on US stocks by 5% annually for four years. This has led many companies to pause their planned investments in the US. Gabriel Grossman, a US tax partner, remarked that "this could lead to significant issues for multinational businesses and the flow of capital from the US."
The introduction of Section 899 raises numerous questions about the future of foreign investment in the US and the potential impact of this new tax on the country's economy.
