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Small US Firms Seek End To BAT Proposal

by Mike Godfrey, Tax-News.com, Washington

19 July 2017


The National Retail Federation (NRF) has urged the House tax-writing committee to consider small retailers and their employees when reforming the nation's tax code, saying they would suffer more than large companies under a proposal to create a border adjustment tax (BAT).

The BAT would exempt export income from tax while taxing imports (by denying US firms a deduction for their cost of foreign-sourced goods and services). In effect, sales to US customers by foreign businesses would be subject to tax, whereas US sales to overseas customers would be exempt, via a corporate tax adjustment, replicating one element of a value-added tax regime. It is effectively intended to nullify the advantages obtained by foreign exporters when trading with the US. Jurisdiction with a value-added tax regime zero-rate exports, enabling exporters to generally supply goods and services to the US market at a zero rate of VAT and retain entitlement to claim input tax credits.

NRF Senior Vice President for Government Relations David French said: "Small retailers are probably the business group that is hardest hit by the potential impact of the BAT. They do not have the economies of scale to be able to reduce the higher costs of their merchandise with the BAT imposed and are most likely to lose sales to lower-priced competition."

A recent NRF survey of small retailers found that three out of five expect a negative impact on their businesses if the BAT is enacted, and 18 percent said their business(es) could fail.

In a letter to the House and Ways and Means Committee, he said: "We hope to work with you toward an alternative to the BAT and protect small retailers and the almost 17 million jobs that they contribute to the US economy." It was sent to coincide with a hearing on the impact of US tax reform on small businesses.

"Our small retail members are very concerned about tax reform efforts that might shift the burden of taxation to consumption," he wrote. "Increased costs to the consumer will cause sales to decline and result in a contraction in their businesses."

"Our retail members believe that a reform of the income tax, by providing a broad base and low rates, will bring the greatest economic efficiency and simplicity to the federal tax system," he said. "These changes will lead to greater investment, more jobs, and greater economic growth."

TAGS: tax | investment | small business | business | value added tax (VAT) | employees | tax credits | tax reform | retail | services

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