US tax bill spurs other countries to consider reform. Nations worry about keeping their investments at home
Canadian investor Robert Campeau has offered to buy the American retailer Allied Stores for some $2.7 billion. If Mr. Campeau is successful, he will benefit from the tax bill President Reagan will sign shortly, because Allied's future tax bill will fall, thereby bolstering the company's profits. ``The reduction in taxes has made American companies very delectable for Canadian companies,'' says Walter Joelson, chief economist for General Electric.
To head off a buying spree of American companies, Canada is considering tax reform. In fact, West Germany, the United Kingdom, and Japan also are looking closely at the congressional tax bill and trying to determine if they too should lower taxes.
With a top corporate tax rate of 34 percent, down from 46 percent currently, the United States will have the lowest maximum corporate tax rate of all the major industrialized countries. Only the UK, with a top rate of 35 percent, will be close.
Not only are ``high-tax'' countries trying to keep their own investors at home, they also are concerned about top executives relocating to the US where personal income taxes are lower. The top US personal rate will fall to 33 percent, from 50 percent.
Jobs are also an issue, because some countries are concerned the lower US tax rate might attract new factories in such high-profit industries as telecommunications and electronics. ``Foreign taxes are now a much more important deciding factor. They are a real out-of-pocket expense,'' says Alan S. Hamilton, an international tax partner at KMG Main Hurdman, an international accounting firm.
Some accountants believe the US is about to become something of a tax haven. Foreign companies may want to locate in the US as they would in the Cayman Islands in the Caribbean where taxes are low or non-existent.
There is no question the US would like to see other countries follow suit. Lower taxes in Germany and Japan, for example, might give those countries some economic pep. ``Secretary of the Treasury James Baker would welcome some stimulus in Germany,'' says Bent Pedersen, a former official of the World Bank and now a managing director of Privatbanken A/S, a Danish bank. A German tax cut would also help Scandinavia, he says, since Germany is the region's largest export market. But, he adds, ``the Germans are cautious people -- they don't rush into things.''