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CEOs Doubtful of Tax Reform this Year, Survey Finds

More than half of business leaders don't expect to enjoy tax cuts until next year, while around a fifth aren't sure when it they'll occur.

Senior executives may be emboldened by Donald Trump’s tax cut pledges, but they’ll probably have to be patient.

Only 16% of the 100 business leaders questioned in a new survey by KPMG expect tax cuts to happen this year, with 53% expecting them to arrive in 2018. Some 11% don’t even expect cuts until 2019 and 21% are unsure when they will occur.

The timing will have big implications for CEOs eagerly waiting to pull the trigger on investment spending that many hope will offset some of the potentially costly impacts of the president’s agenda, such as harder borders.

The survey was conducted in early March, at which point it was starting to become clear that Trump faced challenges getting his healthcare legislation through Congress. Survey participants, however, wouldn’t have been exposed to yesterday’s demoralizing postponement of the White House’s repeal and replace bill vote, which has thrown the viability of Trump’s wider policy agenda, including tax cuts, further into doubt.


“Although the outcome is uncertain, we are looking at the best chance for meaningful tax reform in decades, so attention will likely continue to be high as developments unfold,” KPMG’s Jeffrey C. LeSage said.

More than 141 CEOs recently surveyed by peer group Business Rountable nominated tax reform as the the best way to create a promising environment for growth, ahead of lower regulation and higher spending on infrastructure. Expectations of tax cuts may have been a key driver of a large jump in the group’s first-quarter economic outlook index, though the U.S. economy also has been performing well in the background.

Like the healthcare bill, the structure of any new tax legislation isn’t currently set in stone and there’s much consternation between lawmakers and CEOs about the tax treatment of imports and exports.

When asked to nominate the proposal that would have the greatest impact on their business, 41% of respondents sited a new reduced corporate tax rate. House Republicans have put forward a plan that would cut the corporate tax rate to 20% from 35%. The cut, however, would be partly funded by a 20% tax on imports, while revenue from exports would be rendered tax deductible.

Not surprisingly, executives from the retail and industrial manufacturing sectors selected the border-adjustment proposal as having the greatest impact on their businesses, at 38% and 37%, respectively.

Republicans have placed repealing and replacing the Affordable Care Act at the front of their agenda, stoking fears passage of subsequent legislation including tax reform could be delayed if they can’t find consensus on healthcare. The ructions on display in Washington this week also show that finding consensus on any major legislation could be tough.

Even so, KPMG said CEOs must be prepared. “Developments on the tax reform front could evolve quickly,” the group’s head of federal tax practice, John Gimigliano, said. “That’s why business leaders need to stay engaged, consider how the House GOP blueprint may affect them, and be ready to respond quickly as tax reform advances through the legislative process.”

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