Youre an analyst, your managers asked you to analyze the implications of U.S. corporate tax reform (TCJA) for Microsoft. TCJA lowered the corporate tax rate significantly (from 35% to 21%) and a 100% DRD for dividends from Controlled Foreign Corporations (CFCs). However, TCJA also included changes to the international tax regime and measures to combat base erosion and profit shifting (BEPS). For instance, TCJA included a tax on unrepatriated foreign earnings at a 15.5% or 8% rate, depending on the type of offshore assets. The reform created a new anti-deferral tax on Global Intangible Low-taxed Income or GILTI at 50% of the corporate rate (i.e., 10.5%), but included a Foreign Derived-Intangible Income or FDII deduction on exports of goods or services.

Assuming that Microsoft has executed large offshore transfers of intangible property to low-tax foreign jurisdictions (which likely triggers GILTI), and amassed large offshore cash holding as a result of these structures, how do you evaluate the TCJA from the perspectives of competitiveness and efficiency?

Competitiveness (i.e., TCJA makes investment in US more or less attractive)

Efficiency(i.e., TCJAs effects on compliance costs, simplification of rules, streamlining of incentives, etc.):