In today's highly-disruptive business environment, CEOs fully expect CIOs and technology executives to bring compelling ideas for business model innovation and opportunities for investing in emerging technologies to reimagine and reinvent the enterprise.
"The recent tax reform proposals passed by the House and Senate offer prime-time opportunities for technology leaders to step up as the CEO of Technology and guide the CEO and Board of Directors on where best to prioritize new capital investments that result from tax reform savings," said Hunter Muller, President and CEO of HMG Strategy, the world's largest independent and most trusted provider of executive networking events and thought leadership to support the 360-degree needs of technology leaders.
If lawmakers are able to have finalized tax reform legislation on President Trump's desk for him to sign by Christmas as they intend to, they will have overhauled the entire U.S. tax system in less than 8 weeks. That's blazingly fast, considering that the last time major tax reform occured 30 years ago, it took more than a year to legislate, according to The Wall St. Journal.
If the finalized tax proposal combines key elements of the House and Senate bills as expected, this will carry dramatic implications for companies of all sizes as well as individual taxpayers. For instance, the latest version of the Senate tax reform bill increases the tax rate on the deemed repatriation of currently deferred foreign profits to 14.5 percent for cash and cash-equivalent earnings and 7.5 percent for other profits, according to Multinational Tax & Transfer Pricing News. Taxes raised by this provision now total nearly $300 billion over ten years.
Another critical aspect of the tax reform plan for businesses - if tax reform legislation is passed, it could result in the S&P 500 seeing an additional 20% boost in 2018 earnings, according to StockInvestor.com.
A big earnings boost that results from tax reform should also provide companies with a fresh injection of capital to invest. This has major implications for CIOs who manage the largest corporate budgets as a percentage of revenue.
"The CIO needs to be conversant with the CEO as to how this capital will be invested and how those investments will be prioritized," said Ramón Baez, Former SVP, Customer Evangelist, Hewlett Packard Enterprise who is now Executive-in-Residence and CIO Evangelist at HMG Strategy.
"The two key questions you need to be able to answer as a CIO is whether you're ready to transform the business and do you have a plan of attack for getting the biggest bang for the fresh capital that's about to be freed up?," said Baez.
Of course, there will be further revisions to any final legislation that can change the course of future corporate capital spending. For instance, in an opinion piece published in The Hill by MIT professors Jonathan Gruber and Simon Johnson, "the current House and Senate plans would severely limit the ability of companies to deduct research and development spending from their taxes."
At present, corporations can deduct R&D expenditures as they occur. Under the proposed legislation, the deductions would be spread out over five years, meaning the deductions would be worth less to companies than before.
With a few weeks to go until Christmas and continued discussions taking place on Capitol Hill, it's tough to say how the final tax reform legislation will play out. "But one thing is certain - with unprecedented change underway, CIOs and technology executives need to have a well-conceived strategy in place for communicating investment priorities with the CEO and C-suite," added Muller.