One of the last voices to rise was that of the ICI, an entity that represents the main investment fund managers In the US, who sent an alert on “Section 899” included in the OBBB Fiscal Bill.
In a statement, the entity based in Washington said it was “Totally understandable and correct that Congress writes laws that protect US commercial interests abroad. However, “Section 899” is currently written in a way that could Limit foreign investment in the US“A key engine of the growth of US capital markets that, ultimately, benefits US families.”
Therefore, the statement adds, “we urge the Senate to make this provision more specific to respond to unfair foreign taxes and other worrying measures instead of discouraging the beneficial foreign investment in the US.”
It is worth noting that now the bill is in the hands of the Senate that would vote in July. For this reason, they say in the market that the entity sent a letter to the senator for Idaho, Mike Crapo, president of the Senate Finance Committee, explaining that the provision It could trigger massive sales of shares by international investorsweakening stock assessments and affecting both companies and local shareholders. “
What is the ICI and why alert about “Section 899” in Trump’s Fiscal Law
It is an association that represents the industry of the asset management at the service of private investors. According to the ICI, among its members include collective investment funds, quoted funds (ETF), fixed capital funds and collective investment funds (ITU) in the US, as well as OICVM and similar funds offered to investors in other jurisdictions.
The truth is that this association represents more than 29,000 funds that administer investments for more than US $ 47 billionsomething like 78 times the GDP of Argentina. In addition, they manage almost $ 9 additional billions in regulated fund assets managed outside the US, and therefore, it has offices not only in Washington but also in London and Brussels.
What is the heart? Experts consider that “Section 899” intends to apply fiscal measures against companies with tax policies considered discriminatory for US firmssuch as taxes on digital services or OECD rules on global tax minimums. Currently, the Senate is evaluating its possible implementation.
As stated, the “899”It would impose an additional 5% tax on certain passive income from foreign investors In the US, a percentage that would increase annually until reaching 20%. It happens that This tax would be added to existing taxeswhich could erode the profitability of investments in US actions for funds and individuals from countries such as the United Kingdom, Canada, Australia, Switzerland and members of the European Union.
Hence, ICI warned days ago that collective investment funds, such as Mutual funds, ETFs and their European equivalents (for example, UCits), They would be affected collaterally, since much of your income comes from dividends and other passive income. This, in turn, could reduce Assets under management and commissions that managers perceive.
According to data from the American manager Apollo Global Investment, Foreign investors control about US $ 19 billion in US shares, In addition to important bond positions (US $ 7 billion) and corporate credit (US $ 5 billion).
The ICI declared that the government’s effort to protect its commercial interests in other nations and address the issue of discriminatory foreign taxes. The ICI considers that if the “899” is specified in its current version, It is not ruled out that some countries accelerate their departure from the US market, considering that it would favor their own financial markets.
Therefore, he expects the Senate to adjust the writing to Protect foreign institutional investment and avoid disruption in stock markets, since as the “899” is raised, it could generate more damages than benefits to the US economy and its financial markets. It is worth remembering that the idea of the “899” is Penalize foreign nations companies with unjust foreign taxes, under the Trump optics.
The ICI declared that the government’s effort to protect its commercial interests in other nations and address the issue of discriminatory foreign taxes. However, He warned that the current drafting of the tax bill would do the opposite. In this regard, he explained that some foreign governments could be excited to witness the capital flight from the US because it would benefit their local capital markets.
According to Collins Okoth from Cryptopolitan, the director of Investments of theme Etfs, Yuri Khodjamirian, said that European investors would reconsider their US capital holdings if the government suddenly began to tax their income, and warned that the Impact on the US Variable Income Market would be significantly minimal Since many US companies, especially in S&P 500, are not known for their dividends.
The ETFS topic manager revealed that dividend yields in the US are quite low and explained that not many companies are paying dividends in the US, and that most of the capital won of dividends is returned to the repurchases of shares in the US shares market.
Source: Ambito
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