Barclays, Shell Expect Billion-Dollar Charges From US Tax Reform

31. December 2017.

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The GOP-led tax reform in the U.S. has secured a stamp of approval from small and medium-sized business (SMB) advocates at the National Federation of Independent Business (NFIB), and other analysts say the plan could lend a big boost to large corporates, too.

But two major corporations in the U.K. say they are preparing to lose out due to U.S. tax reform.

Reports in ABC News this week said oil and gas company Shell and financial institition (FI) Barclays say they will each take massive earnings hits, thanks to the governement-backed changes. Fourth quarter charges could be as high as $2.5 billion for Shell, while Barclays said it expects a $1.34 billion charge on deferred tax assets in the U.S.

It’s a result of tax reform in the U.S. that cut corporate income tax from 35 percent to 21 percent, and the change reduces corporations’ ability to offset tax bills with previous losses, ABC News explained. While Shell has said it expects the new tax law in the U.S. to ultimately prove beneficial, Barclays is less convinced. The FI is warning that any benefits could be superseded by the complexity of the new rules.

Barclays also noted that its Common Equity Tier 1 measure under the new law would fall by 20 basis points.

Separate reports in The Telegraph noted that U.S.-based companies, FIs and others should expect major charges as a result of tax reform. Bank of America said it expects a $3 billion charge, while Credit Suisse, based in Switzerland, expects a $2.3 billion charge.

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