BP to take $1.5bn hit on US tax reforms

LONDON: British energy major BP said yesterday that it expected to take a $1.5-billion (1.2-billioneuro) hit from US President Donald Trump’s tax reforms. “The lowering of the US corporate income tax rate to 21 percent requires revaluation of BP’s US deferred tax assets and liabilities,” the company said in a statement.

“The current estimated impact of this will be a one-off non-cash charge to the group income statement of around $1.5 billion that will impact BP’s fourth quarter 2017 results.”

However, the energy giant cautioned that longerterm earnings would be “positively impacted” by the US changes. BP is scheduled to unveil its fourthquarter figures on February 6.

Trump has signed into law a sweeping overhaul of the US tax code, in what was his first major legislative victory since taking office nearly a year ago. The measure is expected to boost corporate profits of banks and other companies over the medium and long term by lowering the corporate tax rate to 21 percent from 35 percent. However, several large corporations have signalled that the law will result in a short-term hit on earnings repatriated from overseas. The reform taxes these earnings at 15.5 percent on cash and equivalents and eight percent on real estate and other illiquid assets.

Other large companies that have alluded to large one-time hits for the fourth quarter include BP’s key rival Royal Dutch Shell, as well as banking groups Barclays and Credit Suisse.