Import tax to fund Mexican border wall?

The Trump administration keeps “floating” tax proposals – here is the latest one (1/26, 5pm EST):

http://www.politico.com/story/2017/01/trump-tax-mexican-imports-pay-for-border-wall-234239

Obviously, the border wall financed this way is paid for by the American people.

Other than keeping updated with the daily developments there is not much a worried Tax VP can do…

Port of Seattle in the morning

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The Fair Tax Act of 2017

Abolition of income taxes and the Internal Revenue Service, and thus leaving collection of a national sales tax to the states. The proposed rate is 23%.

Have a look at what Senator Jerry Moran (R-KS) has put forward for a national sales tax. A major legislative work it is not.

https://www.congress.gov/bill/115th-congress/senate-bill/18/all-info?r=1

Avalara’s comments are here, duly filed under “Wacky Wednesday”: https://www.avalara.com/blog/2017/01/11/national-sales-tax-wacky-tax-wednesday

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“Destination-based” and “Border adjustable” taxes vs VAT

White & Case makes a good effort to explain what is currently going on in U.S. tax reform:

http://www.whitecase.com/publications/alert/border-adjustable-taxes-under-wto-agreements

… and Eversheds reviews the proposals against the common VAT:

http://www.eversheds.com/global/en/what/articles/index.page?ArticleID=en/Competition_EU_and_Regulatory/U_S_border_tax_

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Avalara: Top VAT changes for 2017

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India GST: babysteps towards implementation

Political leaders in India made good progress last week in addressing issues in relation to sharing of GST revenue.

However, final agreement has not been reached, and it looks like the April 1, 2017 tentative date of go-live will not be reached.

The India Constitution mandates that GST implementation must take place before September 16, 2017.

More here: http://www.firstpost.com/business/two-day-gst-council-meet-to-end-today-as-centre-state-stuck-over-the-vexed-dual-control-issue-3170152.html

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Trump threatens a 5% tariff, but Congress opposes

President-elect Trump has been toying with the idea to use his Presidential executive authority – allowed under existing trade laws – to introduce a 5% tariff on all imports into the U.S.

Although initially this proposal was considered a trial balloon to push WTO negotiations, re-negotiate NAFTA and more generally as an extension of the “America First” election rhetoric, Congress is now getting seriously concerned.

As you know, the cornerstone argument for the 5% import tariff is that VAT countries “subsidize” domestic exporters by allowing for the zero-rate, with credit. U.S. companies that import into other countries pay the import VAT, which the U.S. considers a tariff (never mind that the import VAT is refundable or creditable). The 5% import tariff is to counter the “export rebate” and to protect American manufacturers from “subsidized” imports into the U.S. – particularly from China.

The CNN report indicates that the 5% tariff would be one of the first executive actions of Trump as the new president.

See the CNN article here – be mindful of the video that autostarts in some browsers: http://www.cnn.com/2016/12/21/politics/donald-trump-tariffs/index.html

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Tax Analysts: Trump suffers from VAT envy

Robert Goulder writes in Forbes “Diagnosis: Donald Trump Suffers From VAT Envy”:

“Strictly speaking, Trump’s claims about VAT are false. VAT is neither a trade subsidy nor a trade barrier. In fact, VAT is economically neutral. Tax burdens from the origin country do not carry over with exports as they’re transported to their place of consumption. That’s the beauty of the border adjustment, which is an indispensable feature of every destination-based VAT. The border adjustment establishes a level playing field between domestically manufactured goods and foreign imports.”

Well, VAT is not economically neutral, because someone (the individual) will have the economic burden of the tax – but otherwise Goulder is right.

Here is a link to his article: http://www.forbes.com/sites/taxanalysts/2016/12/21/diagnosis-donald-trump-suffers-from-vat-envy/. Highly recommended reading – wish U.S. politicians would read this too.

By the way, five years ago Tax Analysts published “The VAT Reader, What a Federal Consumption Tax Would Mean for America”. I had the honor of adding my 2 cents to this. Below is a pdf.

Download (PDF, 1.69MB)

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