In an interview with Capital 95.8FM this morning (4^th May 2017), Dr Chan Yan Chong, keynote speaker of Shares Investment Conference 1H2017 talked about some factors that would impact the global stock markets and economy. Among which, tax reforms in the US should have the heaviest impact.

New catalysts to keep the “old bull” running

Though the US stock market is in the eighth year of its bull run, Dr Chan opined that the old bull, driven by Trumponomics and Donald Trump’s tax reforms, would keep running. After all, Trump is said to seek cutting corporate tax rate to 15 percent, a rate that falls below that of Singapore (17 percent) and Hong Kong (16.5 percent).

Trump’s game plan

From a commonsensical point of view, won’t cutting corporate tax reduce the revenue of the US government? How would the US government cope with its huge expenses then?

Dr Chan also pointed out that such a move is not “politically correct”, as it benefits the rich significantly but not so much for the poor.

On the other hand, Dr Chan suggested that Trump might be hoping to “kill two birds with one stone” through corporate tax cuts so that enterprises can have more money to expand businesses and create more employment opportunities. The rationale is that the money made by these companies will eventually make up for the lost revenue from tax cuts anyway.

Impact on Asian Countries

Dr Chan believes that the US Congress (made up of Republican majority) will almost certainly pass Trump’s tax reform plan.

If this happens, Asian countries will take a hit, as many companies will move to the states due to the attractiveness of low tax rate. The economic growth and employment opportunities in Singapore and Hong Kong etc. will inevitably be affected.

In that case, Dr Chan opined that Singapore would have no choice but to cut corporate tax as well to stay competitive. However, he also said that many European countries would be unable to follow suit, given their large welfare spending. Even if they do, smaller economies cutting taxes would have less severe implications.

http://aspire.sharesinv.com/47084/dr-chan-how-us-tax-reforms-will-impact-global-markets/