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China 'Would Respond' To Any US Border Tax

by Mary Swire,, Hong Kong

23 February 2017

At a press briefing on February 21, China's Minister of Commerce, Gao Hucheng, indicated that his country would react were the US to impose a border adjustment tax.

He confirmed that China has noted the present discussions in the United States on the introduction of a BAT within prospective tax reform, but that he did "not want to comment too much, because we are awaiting confirmation of the eventual attitude of the new US Government."

However, he did indicate that, with regard to the BAT, China has "always advocated that the United States, in formulating its trade policy, should abide by international trade rules. If the United States introduces specific programs, they will be assessed carefully by China, and a response will be calibrated to the results of that assessment."

The US House of Representatives Republican Party's controversial BAT proposal would adopt a corporate tax provision operating in a similar fashion to other countries' value-added tax (VAT) systems, whereby a tax would be imposed on imports and tax rebates would be provided on exported goods.

Gao's comments refer to allegations that the BAT would fall foul of the US's tax treaty obligations and, more particularly, of World Trade Organization rules, which allow for the rebating of indirect taxes, such as a VAT, on exports but not for the rebating of direct income taxes.

TAGS: tax | value added tax (VAT) | corporation tax | China | United States | tax breaks | tax reform | trade

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