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Follow the money

The passage, in December 2017, of the US ‘Tax Cuts and Jobs Act’ was heralded as a potential game-changer, a reshuffling of the competitive landscape that could significantly influence the investment decisions of US and other international companies. Six months on, what has been the impact on Belgium so far?

The ‘Tax Cuts and Jobs Act’ (TCJA) brought the headline US corporate tax rate down from 35% to 21% and introduced a series of measures to make the US more attractive for investments and cash flows. One of those measures is a one-off tax of 15.5% or 8% on the repatriation of the offshore earnings of US-based multinationals, aimed at stimulating these companies to move substantial amounts of cash to the US and thereby boost domestic investment.

More than a half year after the adoption of the TCJA, the impact is clearly noticeable. According to preliminary estimates from the Bureau of Economic Analysis, US direct investment abroad dropped by $149 billion in the first quarter of 2018, and approximately $184 billion of cash from holding companies was repatriated.

While countries such as the Netherlands and Switzerland, which are home to many holding companies, have experienced net outflows of US investment as cash was moved to the States, the impact of the TCJA on Belgium has been rather limited. Belgium, which has fewer holding companies, continues to attract a net inflow of US investment. In fact, the preliminary figures show that Belgium attracted the 4th highest amount of US direct investment in Europe in the first quarter of this year ($1.9 billion), after only the UK, Luxembourg and Germany.

The US was the largest foreign investor in Belgium in 2017, and even after the introduction of the TCJA, US companies continue to say #Yes2Belgium, as illustrated by some recent investments made or announced by AmCham Belgium members:

  • DAF Trucks (Paccar) expanded its production in Westerlo (Oevel), creating 40 new jobs.
  • Samsonite is expanding its European Distribution Center in Oudenaarde, creating 40 to 60 new jobs.
  • UPS opened its new facility in Lummen, a €4 million investment, creating 160 jobs.
  • McDonald’s aims to create 2,000 new jobs by 2023, with the opening of 40 new restaurants.
  • 3M opened a unique Customer Technical Center in Zwijndrecht, a €4 million investment.
  • Eastman invested €3 million in its new research and innovation center in Zwijnaarde, and plans to continue expanding for the next five years.
  • Cargill is investing €12 million in its Mouscron facility to meet customer demand for Belgian chocolate.
  • Coca-Cola is investing more than €13 million to expand capacity at its Wilrijk warehouse and distribution center.

The full impact of the TCJA might not yet have been felt, but it is a reminder that the competition is always evolving. In order to remain competitive and attract more investments and jobs, Belgium will need to take transformative action – including further tax reform. AmCham Belgium is ready to work with all levels of government to help Belgium stay in the game.

Keep an eye open for the US Top 50, our annual listing of the 50 largest US groups in Belgium as measured by employment, which will be published in September!