The incoming Trump administration is expected to implement tax reforms, including corporate tax cuts, focusing on domestic manufacturing companies. Analysts suggest that Korean companies with investments in the U.S. should closely monitor these developments.
On Monday, the International Trade and Commerce Research Institute of the Korea International Trade Association (KITA) published a report titled “Outlook on Tax Reforms under the Trump Administration and Implications.” The report analyzed that President-elect Trump will likely extend the Tax Cuts and Jobs Act (TCJA) and further reduce federal corporate tax rates, echoing policies from his first term.
According to the report, with Republicans controlling both chambers of Congress, the tax reform process is expected to gain momentum. The TCJA, enacted during Trump’s first term in 2017, included provisions to lower corporate tax rates and the top individual income tax rate.
KITA forecasts that Trump will implement a tax policy reducing the federal corporate tax rate from 21% to 20%, with potential further cuts to 15% for domestic manufacturers. However, it cautioned that the lack of specific legislation could lead to business uncertainty.
The report also suggests that TCJA revisions will likely extend or make permanent existing tax benefits.
While the TCJA was passed initially because it would not interfere with long-term fiscal goals, Trump’s potential re-election could allow for extensions or permanent implementation of these tax cuts before they expire.
However, the prospects for U.S. legislation on digital taxes and a global minimum tax appear dim. Despite OECD agreements, the Republicans have opposed introducing a digital tax, arguing it would infringe on tax sovereignty and unfairly target American companies.
Kim Geum Yoon, a senior researcher at the Korea International Trade Association, stated, “Tax reduction policies such as the corporate tax cuts could help alleviate some uncertainty surrounding the Inflation Reduction Act’s subsidy policies, which remain unclear. Both companies with existing U.S. investments and those planning future investments should carefully consider these potential tax reforms.”
