Is Trump's Tax Bill Driving European Companies to the U.S.? My Two Cents.

Wise Guys and Tax Hikes: The Plot Thickens

Alright folks Bill Gates here. You know back in my day we worried about whether we could fit enough transistors on a chip. Now everyone's sweating over Section 899 of Trump's tax bill. Wise that fintech firm from the U.K. is thinking about moving its primary listing to the U.S. And why? Because this new provision might penalize foreign owned firms in countries with and I quote 'unfair foreign taxes.' Unfair huh? Sounds like someone's been playing too much Monopoly.

Tax Man Cometh: A 5% to 20% Headache

So here's the deal. If a foreign corporation is more than 50% owned by non U.S. entities this Section 899 slaps a new withholding tax on U.S. sourced income. It starts at 5% and climbs to a maximum of 20%. That's on top of existing taxes! Even Goldman Sachs is saying this could ding earnings for companies in the Stoxx Europe 600 index. I remember when 5% was a good interest rate. Now it's just another reason for CEOs to pull their hair out. And for context I no longer have hair to pull out so...perspective.

Relisting Rodeo: A Quick Fix?

Goldman Sachs suggests relisting in the U.S. as a way to dodge this tax bullet. The idea is to increase the base of American investors pushing non U.S. ownership below 50%. Makes sense right? Except as one anonymous executive pointed out it might not be that simple. Just listing in the U.S. and hoping for the best? Sounds like trying to fix Windows 95 with a paperclip. Ambitious but probably not effective. 'Measuring programming progress by lines of code is like measuring aircraft building progress by weight.' Just saying!

The Fine Print: A 'Look Through' Glass?

This tax bill includes a 'look through concept,' which means U.S. fund managers investing on behalf of foreign clients don't count toward the exemption requirements. Monitoring the shareholder register? Resource intensive to say the least. It's like trying to debug a million lines of code without comments. You'll probably end up needing more coffee than I drink in a year and trust me that's saying something. "The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency." I wonder what this applies to?!

The Political Chess Game: Whose Move Is It?

Of course there's always the option of European governments dropping their 'unfair foreign tax' policies. Apparently some Republicans see this as a tool to encourage changes in behavior. It’s like me trying to convince people to use Bing over Google. A noble effort perhaps but let's be realistic. "Success is a lousy teacher. It seduces smart people into thinking they can't lose." This tax bill might be teaching some countries a similar lesson.

Migration Mania: Is the Tide Turning?

Goldman Sachs thinks this could fuel an already existing corporate migration trend. European companies have felt disadvantaged for years citing valuation discounts compared to their U.S. peers. Wise for example listed in London in 2021 but now they're thinking about greener pastures. It reminds me of the old days at Microsoft. Sometimes you just need to move to where the opportunities are. "Your most unhappy customers are your greatest source of learning." Maybe this tax bill is just a painful learning experience for Europe? In any case better get your house in order...