By John Gimigliano, Principal in Charge, Federal Legislative & Regulatory Services, Washington National Tax, KPMG LLP
Feb 10, 2017
The House tax reform proposal (commonly referred to as the “Blueprint”) includes a border-adjustable tax has proven to be controversial. Border adjustability would impose a 20 percent tax on imported goods and services; it would also allow U.S businesses to export goods and services tax-free.
More than $1 trillion is projected to be raised from the border adjustable tax. This amount would be used to offset revenue losses resulting from the proposed cut in the top corporate tax rate from 35 percent to 20 percent, which is the centerpiece of House business tax reform proposal.
However, it’s uncertain whether there’s enough support for the border adjustable tax for the proposal to pass both houses of Congress. It has generated big opposition from major companies who do a lot of importing, and some Republican Senators have expressed their concerns as well. Perhaps even more important, it has been unclear how strongly President Trump is committed to border tax adjustment.
Bottom line: If the border adjustable tax isn’t part of the overall Blueprint, it’s not clear how the Congress will offset the cost of reducing the corporate tax rate.
So stay tuned. The President indicated he’d be releasing his own tax proposal in March. It will be interesting to see what position he takes on border adjustment, and how it impacts the prospects of major tax reform.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.