Although the Tax Cuts and Jobs Act (TCJA) was meant to discourage companies from moving profits overseas, it could actually make it more rewarding.
Before the TCJA, companies that shifted profits linked to U.S. sales, research or production had to pay U.S. taxes on the money at the rate of 35 percent when they brought those profits home. The TCJA cuts the corporate tax rate to 21 percent and allows income from overseas to be taxed as low as 10 percent.
Western economies operate a territorial tax system and have rules to tackle the risks of profit shifting. The rules allow governments to tax income reported in tax havens as though it emerged in the home country.
Many large U.S. companies report low U.S. profits and higher foreign profits and will reap rewards from the corporate tax cut.