Survey: Execs voice more confidence after GOP tax overhaul

Financial executives in the U.S., Canada and Mexico are reporting increased confidence about the economy and their companies’ prospects following passage of the GOP tax law, according to a new survey from Deloitte.

Ninety percent of chief financial officers (CFOs) who participated in the professional services company’s first-quarter 2018 survey said the current condition of the North American economy is good.

That’s up from 74 percent in the previous quarter and a record level for the survey, which started in 2010. Perceptions of the European and Chinese economies also hit record highs in the survey.

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Nearly 60 percent of CFOs said they were more optimistic about their companies’ prospects compared to the previous quarter, while only 6 percent said they were less optimistic.

CFOs’s expectations for revenue growth, earnings growth, capital investment and domestic personnel growth all hit multi-year highs in the survey.

The GOP tax overhaul, which President Trump signed into law in December, cut the corporate tax rate from 35 percent to 21 percent. Republicans argue that the law will boost economic growth and business investment in the U.S.

A number of CFOs said they expect their companies to make new investments and hire more workers following implementation of the new tax law.

Forty-six percent of CFOs said they expect increased investment in U.S. operations, and 38 percent said they expect more front-loading of capital investments.

Meanwhile, 31 percent said they expect their companies to boost domestic hiring and 38 percent said they anticipate that their companies will increase domestic wages.

Democrats have criticized companies for announcing stock buybacks and dividends in the wake of the tax-law’s passage. Twenty-two percent of CFOs surveyed said they expect their companies will reduce the number of outstanding shares and 31 percent said they expect higher dividends.

CFOs also expect challenges in implementing the tax law. Sixty percent said they expect high complexity in implementation, and 33 percent said the new law has increased the need to strengthen or restructure their companies’ tax functions.

One feature of the new tax law is that it requires companies to repatriate earnings held overseas under the old tax code within eight years.

More than 90 percent of CFOs whose companies plan to accelerate repatriation expected their companies to use repatriated cash to invest in core businesses, 63 percent expected their companies to use repatriated cash to pay down debt, 55 percent expected their companies to use repatriated cash to hire employees and 52 percent expected their companies to use repatriated cash for stock buybacks.

When asked an open-ended question about their concerns, CFOs often cited geopolitical risks, the future of trade policy and the ability to hire good talent.

The survey of 155 CFOs from the U.S., Canada and Mexico was conducted Feb. 12-23. Most of the CFOs who participated in the survey work at companies with more than $1 billion in annual revenue.