MARCH 2017 | Vol. 31 No. 3
It is hard to remember a time when discussion over a new set of tax rules in the United States was so widely followed overseas. The rules could have serious consequences for so many companies and countries.
I am referring to the Border Adjustment Tax (BAT), which has been suggested by the leadership of the Republican party in the US Congress.
So far, BAT has barely been discussed by the Senate or president Trump. While there is a clear majority of Republicans that supports a corporate tax cut, there is disagreement on how best to close the fiscal revenue gap that would result from such a reform.
Should it be filled with another form of tax on imports to the United States? Or would a new expected set of incentives to repatriate capital that large US corporations have abroad be enough to close the gap?
BAT, as a tax on imported goods, is viewed by some as a possible means of filling the expected gap in revenues. For others in Congress and representatives from various industry sectors, such as retail and automotive, the negative effects of BAT on domestic prices and the risk of possible retaliation by other countries outnumber the potential benefits of such a tax. In particular, BAT proposes to tax all sales of goods coming into the United States, but would exclude exports thereby creating a climate much more favorable for exporters.
In our cover story this month we look at the ongoing tax reform debate and the possible new rules for trade; but we also explore how exporters to the United States, and US-based importers, are likely to respond to BAT or similar proposals.
The CFO of a major tech company in Silicon Valley told Global Finance recently that his team is spending a lot of time lately working on different tax scenarios and their possible consequences. The same, we are sure, is probably happening at the headquarters of large exporters of goods and services to the United States.