U.S. tax repatriation plan may not cure long-term dollar weaknessNEW YORK (Reuters) - Investors looking for the U.S. Republican tax bill to prompt multinational companies to convert foreign profits into dollars and end the worst slide in the greenback in a decade may have to temper their hopes for a prolonged rebound. The plan, designed in part to give U.S. multinationals a reason to repatriate the roughly $2.6 trillion in profits held by their foreign subsidiaries, would slash tax rates on such previously accumulated earnings. Companies have been slow to recognize those profits on their balance sheets so they can avoid paying U.S. corporate taxes, which stand at a rate of 35 percent.  (Graphic: Overseas Cash Stash - reut.rs/2ABRzTu) The dollar is down roughly 8.1 percent so far this year against a basket of currencies. The greenback has suffered as the Federal Reserve has raised interest rates more slowly than expected and President Donald Trump has not been able to sign any major legislation into law. (Graphic: Dollar Rise During 2005 Tax Holiday - reut.rs/2A77Y5o) Yet analysts say that even if the tax bill becomes law, the dollar may not benefit in the long term because the legislation gives companies little incentive to convert their foreign profits right away. At the same time, many large companies already have those profits in dollar-denominated securities.  The Republicans’ proposals differ from the last tax break on foreign profits, which global financial services company Unicredit said brought roughly $300 billion to the United States. The bill President George W. Bush signed in October 2004 drastically reduced tax rates to 5.25 percent over a 12-month window and, along with aggressive tightening by the Federal Reserve, helped send the dollar nearly 13 percent higher the following year.  This time, however, the Republican bills before a conference committee would permanently change how U.S. companies’ foreign profits are taxed.  The United States would no longer collect taxes on most future earnings a company makes beyond its borders. As a result, companies would have fewer incentives to bring previously accumulated foreign profits home quickly because rates are not scheduled to revert higher.  Up to $250 billion in foreign earnings could be repatriated over an indefinite period, according to TD Securities. While that could provide some boost to the dollar, repatriation will probably not be a significant ongoing factor in the $4.5 trillion global currency market, analysts said. “It was a one-off repatriation and mandatory in 2005 so companies took advantage of it, and the dollar benefited from it,” said Mark McCormick, North American head of FX strategy at TD Securities in Toronto. “But this tax bill doesn’t have that same urgency.”   So far, there is no final version of the tax bill. Legislation passed by the House of Representatives would allow companies to bring back foreign profits at a 14 percent repatriation tax rate, as opposed to the current 35 percent, over eight years. The Senate bill, approved over the weekend, puts the rate at 14.49 percent.  Neither bill requires companies to convert foreign profits into dollars.  Prospects of a tax break on companies’ foreign earnings and expectations of wider U.S. budget deficits helped boost the dollar to its highest levels since 2002 soon after Trump’s presidential victory in November 2016.  Now that the tax bills have passed both houses of Congress, “dollar bulls have started banging their drums” again, analysts at Unicredit said. However, they said this attitude is misguided because the vast majority of the earnings that companies will repatriate are probably already in dollar-denominated securities in the United States.  “Even a significant wave of repatriation might not lift the dollar directly, as some of the largest U.S. corporations already hold a lot of cash in dollar-denominated assets,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.  In many cases, foreign profits are based in dollars held in accounts at U.S. banks, yet are treated as overseas assets on a company’s balance sheet. As a result, they are not recognized as U.S. income and are therefore not subject to U.S. taxes.  The Brookings Institution, a non-profit public policy organization based in Washington, estimates that at the 15 U.S. companies with the largest cash balances abroad, 95 percent of foreign profits are held in U.S. dollar-denominated cash or equivalents. For example, Microsoft Corp noted in its annual report that as of June 30, roughly 92 percent of the cash and short-term investments held by its foreign units was already invested in U.S. dollar assets. Despite some skepticism about U.S. repatriation flows, some analysts say the dollar could get a short-term boost. “Immediately after tax reform is passed, you’re going to hear this giant sucking sound as money is heading home very quickly,” said David Woo, head of global rates and currencies research at Bank of America Merrill Lynch. Yet he does not expect a dollar rally to continue beyond the second quarter of 2018, partly due to concerns about the tax plan’s impact on the U.S. fiscal deficit.  Over the long term, the dollar will probably continue to slide, said Brian Jacobsen, multi-asset strategist at Wells Fargo Asset Management. The effects of the tax bill are already largely priced into the currency market, leaving little unexpected demand over the following 12 months, he said.  “We are positioning client portfolios for a little more dollar weakness,” he said. “Not strength.” politicsNews
tax repatriation plan may cure dollar weaknesses york reuters investors looking republican tax bill prompt multinational companies convert foreign profits dollars end worst slide greenback decade may temper hopes prolonged rebound the plan designed part give multinational reason repatriated roughly trillion profits held foreign subsidiaries would slash tax rates previously accumulated earnings companies slow recognize profits balance sheets avoid paying corporate taxes stand rate percent graphic overseas cash stash the dollar roughly percent far year basket currencies the greenback suffered federal reserve raised interest rates slowly expected president donald trump able sign major legislation law graphic dollar rise during tax holiday yet analysts say even tax bill becomes law dollar may benefit long term legislation gives companies little incentive convert foreign profits right away at time many large companies already profits securities the republicans proposals differ last tax break foreign profits global financial services company unicredit said brought roughly billion united states the bill president george bush signed october drastically reduced tax rates percent window along aggressive tightening federal reserve helped send dollar nearly percent higher following year this time however republican bills conference committee would permanently change companies foreign profits taxed the united states would longer collect taxes future earnings company makes beyond borders as result companies would fewer incentives bring previously accumulated foreign profits home quickly rates scheduled revert higher up billion foreign earnings could repatriated indefinite period according td securities while could provide boost dollar repatriation probably significant ongoing factor trillion global currency market analysts said it repatriation mandatory companies took advantage dollar benefited said mark mccormick north american head fx strategy td securities toronto but tax bill so far final version tax bill legislation passed house representatives would allow companies bring back foreign profits percent repatriation tax rate opposed current percent eight years the senate bill approved weekend puts rate percent neither bill requires companies convert foreign profits dollars prospects tax break companies foreign earnings expectations wider budget deficits helped boost dollar highest levels since soon trump presidential victory november now tax bills passed houses congress dollar bulls started banging drums analysts unicredit said however said attitude misguided vast majority earnings companies repatriated probably already securities united states even significant wave repatriation might lift dollar directly largest corporations already hold lot cash assets said shaun osborne chief fx strategist scotiabank toronto in many cases foreign profits based dollars held accounts banks yet treated overseas assets company balance sheet as result recognized income therefore subject taxes the bookings institution public policy organization based washington estimates companies largest cash balances abroad percent foreign profits held cash equivalents for example microsoft corp noted annual report june roughly percent cash investments held foreign units already invested dollar assets despite skepticism repatriation flows analysts say dollar could get boost immediately tax reform passed going hear giant sucking sound money heading home quickly said david woo head global rates currencies research bank america merriam lynch yet expect dollar rally continue beyond second quarter partly due concerns tax plan impact fiscal deficit over long term dollar probably continue slide said brian jacobs strategist wells cargo asset management the effects tax bill already largely priced currency market leaving little unexpected demand following months said we positioning client portfolios little dollar weakness said not politicsnews
Your task is to classify the provided input as real or fake news. Label 0 is meant for fake news, Label 1 is for real news. TEXT: U.S. tax repatriation plan may not cure long-term dollar weaknessNEW YORK (Reuters) - Investors looking for the U.S. Republican tax bill to prompt multinational companies to convert foreign profits into dollars and end the worst slide in the greenback in a decade may have to temper their hopes for a prolonged rebound. The plan, designed in part to give U.S. multinationals a reason to repatriate the roughly $2.6 trillion in profits held by their foreign subsidiaries, would slash tax rates on such previously accumulated earnings. Companies have been slow to recognize those profits on their balance sheets so they can avoid paying U.S. corporate taxes, which stand at a rate of 35 percent.  (Graphic: Overseas Cash Stash - reut.rs/2ABRzTu) The dollar is down roughly 8.1 percent so far this year against a basket of currencies. The greenback has suffered as the Federal Reserve has raised interest rates more slowly than expected and President Donald Trump has not been able to sign any major legislation into law. (Graphic: Dollar Rise During 2005 Tax Holiday - reut.rs/2A77Y5o) Yet analysts say that even if the tax bill becomes law, the dollar may not benefit in the long term because the legislation gives companies little incentive to convert their foreign profits right away. At the same time, many large companies already have those profits in dollar-denominated securities.  The Republicans’ proposals differ from the last tax break on foreign profits, which global financial services company Unicredit said brought roughly $300 billion to the United States. The bill President George W. Bush signed in October 2004 drastically reduced tax rates to 5.25 percent over a 12-month window and, along with aggressive tightening by the Federal Reserve, helped send the dollar nearly 13 percent higher the following year.  This time, however, the Republican bills before a conference committee would permanently change how U.S. companies’ foreign profits are taxed.  The United States would no longer collect taxes on most future earnings a company makes beyond its borders. As a result, companies would have fewer incentives to bring previously accumulated foreign profits home quickly because rates are not scheduled to revert higher.  Up to $250 billion in foreign earnings could be repatriated over an indefinite period, according to TD Securities. While that could provide some boost to the dollar, repatriation will probably not be a significant ongoing factor in the $4.5 trillion global currency market, analysts said. “It was a one-off repatriation and mandatory in 2005 so companies took advantage of it, and the dollar benefited from it,” said Mark McCormick, North American head of FX strategy at TD Securities in Toronto. “But this tax bill doesn’t have that same urgency.”   So far, there is no final version of the tax bill. Legislation passed by the House of Representatives would allow companies to bring back foreign profits at a 14 percent repatriation tax rate, as opposed to the current 35 percent, over eight years. The Senate bill, approved over the weekend, puts the rate at 14.49 percent.  Neither bill requires companies to convert foreign profits into dollars.  Prospects of a tax break on companies’ foreign earnings and expectations of wider U.S. budget deficits helped boost the dollar to its highest levels since 2002 soon after Trump’s presidential victory in November 2016.  Now that the tax bills have passed both houses of Congress, “dollar bulls have started banging their drums” again, analysts at Unicredit said. However, they said this attitude is misguided because the vast majority of the earnings that companies will repatriate are probably already in dollar-denominated securities in the United States.  “Even a significant wave of repatriation might not lift the dollar directly, as some of the largest U.S. corporations already hold a lot of cash in dollar-denominated assets,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.  In many cases, foreign profits are based in dollars held in accounts at U.S. banks, yet are treated as overseas assets on a company’s balance sheet. As a result, they are not recognized as U.S. income and are therefore not subject to U.S. taxes.  The Brookings Institution, a non-profit public policy organization based in Washington, estimates that at the 15 U.S. companies with the largest cash balances abroad, 95 percent of foreign profits are held in U.S. dollar-denominated cash or equivalents. For example, Microsoft Corp noted in its annual report that as of June 30, roughly 92 percent of the cash and short-term investments held by its foreign units was already invested in U.S. dollar assets. Despite some skepticism about U.S. repatriation flows, some analysts say the dollar could get a short-term boost. “Immediately after tax reform is passed, you’re going to hear this giant sucking sound as money is heading home very quickly,” said David Woo, head of global rates and currencies research at Bank of America Merrill Lynch. Yet he does not expect a dollar rally to continue beyond the second quarter of 2018, partly due to concerns about the tax plan’s impact on the U.S. fiscal deficit.  Over the long term, the dollar will probably continue to slide, said Brian Jacobsen, multi-asset strategist at Wells Fargo Asset Management. The effects of the tax bill are already largely priced into the currency market, leaving little unexpected demand over the following 12 months, he said.  “We are positioning client portfolios for a little more dollar weakness,” he said. “Not strength.” politicsNews
Your task is to classify the provided input as real or fake news. Label 0 is meant for fake news, Label 1 is for real news. TEXT: tax repatriation plan may cure dollar weaknesses york reuters investors looking republican tax bill prompt multinational companies convert foreign profits dollars end worst slide greenback decade may temper hopes prolonged rebound the plan designed part give multinational reason repatriated roughly trillion profits held foreign subsidiaries would slash tax rates previously accumulated earnings companies slow recognize profits balance sheets avoid paying corporate taxes stand rate percent graphic overseas cash stash the dollar roughly percent far year basket currencies the greenback suffered federal reserve raised interest rates slowly expected president donald trump able sign major legislation law graphic dollar rise during tax holiday yet analysts say even tax bill becomes law dollar may benefit long term legislation gives companies little incentive convert foreign profits right away at time many large companies already profits securities the republicans proposals differ last tax break foreign profits global financial services company unicredit said brought roughly billion united states the bill president george bush signed october drastically reduced tax rates percent window along aggressive tightening federal reserve helped send dollar nearly percent higher following year this time however republican bills conference committee would permanently change companies foreign profits taxed the united states would longer collect taxes future earnings company makes beyond borders as result companies would fewer incentives bring previously accumulated foreign profits home quickly rates scheduled revert higher up billion foreign earnings could repatriated indefinite period according td securities while could provide boost dollar repatriation probably significant ongoing factor trillion global currency market analysts said it repatriation mandatory companies took advantage dollar benefited said mark mccormick north american head fx strategy td securities toronto but tax bill so far final version tax bill legislation passed house representatives would allow companies bring back foreign profits percent repatriation tax rate opposed current percent eight years the senate bill approved weekend puts rate percent neither bill requires companies convert foreign profits dollars prospects tax break companies foreign earnings expectations wider budget deficits helped boost dollar highest levels since soon trump presidential victory november now tax bills passed houses congress dollar bulls started banging drums analysts unicredit said however said attitude misguided vast majority earnings companies repatriated probably already securities united states even significant wave repatriation might lift dollar directly largest corporations already hold lot cash assets said shaun osborne chief fx strategist scotiabank toronto in many cases foreign profits based dollars held accounts banks yet treated overseas assets company balance sheet as result recognized income therefore subject taxes the bookings institution public policy organization based washington estimates companies largest cash balances abroad percent foreign profits held cash equivalents for example microsoft corp noted annual report june roughly percent cash investments held foreign units already invested dollar assets despite skepticism repatriation flows analysts say dollar could get boost immediately tax reform passed going hear giant sucking sound money heading home quickly said david woo head global rates currencies research bank america merriam lynch yet expect dollar rally continue beyond second quarter partly due concerns tax plan impact fiscal deficit over long term dollar probably continue slide said brian jacobs strategist wells cargo asset management the effects tax bill already largely priced currency market leaving little unexpected demand following months said we positioning client portfolios little dollar weakness said not politicsnews