Prospect of a Border Tax is Driving Retailers BATty
Today most politicians and businesses favor U.S. corporate tax reform as a long overdue undertaking to increase American competitiveness worldwide. The primary objective of corporate tax reform is to create a simplified tax system that ultimately reduces the effective corporate tax rate so that corporations within the United States can be more competitive globally and less inclined to move their production or domicile overseas.
Now that such an opportunity appears to be on the horizon, the debate is as heated as ever regarding how exactly to accomplish this goal. Meanwhile, there is a growing doubt that broad-based tax reform will be signed into law during this year, despite comments back in March that tax reform legislation could be drafted by Congress before its August recess. One of the most contentious and integral pieces of the tax puzzle is the border adjustment tax, which essentially would tax imports and exempt exports. While there has been some talk of making changes to it, without a border adjustment tax at all, corporate tax reform cannot feign revenue neutrality and likely would not pass muster with congressional deficit hawks. As a result, the entirety of corporate tax reform legislation may very well hinge on this divisive issue.
In this article, Tamara McGrath and Amir Agam, Senior Managing Directors in the Retail & Consumer Products practice, along with John Yozzo, Managing Director, take a closer look at the border adjustment tax in order to shed a light on its effects, the winners and losers in the economy and the overall potential industry impact for retailers.