1. American fund managers are lobbying Congress to persuade lawmakers to amend a provision in the 'Big and Beautiful' Act that they believe could lead to a rapid withdrawal of foreign investors from U.S. investments; 2. This provision aims to punish foreign-funded enterprises operating in the U.S. that come from countries imposing 'unfair foreign taxes' by imposing retaliatory taxes.
On June 10, the Financial Associated Press reported (Editor: Xia Junxiong) that American fund managers are lobbying Congress to persuade lawmakers to amend a provision in the 'Big and Beautiful' Act that they believe could lead to a rapid withdrawal of foreign investors from U.S. investments.
The 'Big and Beautiful' Act is a tax reform bill heavily promoted by U.S. President Trump, named after Trump described it as 'grand and beautiful.' The bill is currently under review in the Senate.
The 'Big and Beautiful' Act has faced opposition from Democrats and some conservative Republicans. The Democrats argue that the bill not only cuts taxes for the wealthy but also reduces significant social welfare programs. Conservative Republicans express concern that the bill could further increase the U.S. federal government deficit.
However, regarding Clause 899 of the 'Big and Beautiful' Act that has sparked significant controversy, both parties in Congress have not raised objections.
Clause 899 aims to punish foreign-funded enterprises operating in the U.S. that come from countries imposing 'unfair foreign taxes' by imposing retaliatory taxes.
The starting tax rate for this tax is 5%, increasing by 5 percentage points each year, reaching a maximum of 20%, which is an additional tax on top of the existing taxes and tax agreements in various countries.
The Investment Company Institute (ICI), representing American fund companies, sent a letter last week to Senate Finance Committee Chairman Mike Crapo, attempting to lobby Congress to amend this provision.
ICI stated in the letter: “To avoid the impact of Clause 899, portfolio investors are likely to quickly withdraw from American Stocks, resulting in capital Outflow from the United States. If foreign investors continue to sell off and depress the American stock market, it will harm the interests of American companies and investors.”
ICI also pointed out in the letter that the American Funds management Industry has approximately 18 trillion dollars invested in the American stock market, which will become a co-victim of Clause 899.
Funds typically charge fees as a percentage of managed Assets, and if foreign investors withdraw due to concerns about Clause 899, it could lead to a decline in revenue for investment management companies.
Data from Apollo Global Management shows that foreign investors hold 19 trillion dollars in American Stocks, 7 trillion dollars in American government Bonds, and 5 trillion dollars in American credit.
ICI emphasized that it fundamentally supports the U.S. government in “protecting overseas American business interests and responding to discriminatory foreign taxation.” However, it simultaneously stated that the current draft of the bill is just the opposite.
“Certain foreign governments may actually welcome capital Outflow from the United States, as it benefits their own stock markets, which is not the behavioral incentive that Clause 899 seeks to achieve,” ICI stated in the letter.
Editor/jayden
