1. This will adversely affect
the consumer by raising prices on imported goods. Do Americans want to pay
European prices?
The goal of the legislation is to
get other countries to stop imposing the VAT on U.S. exports and to stop
rebating the VAT on their exports to the U.S. Only if these practices continue
will a neutralizing fee be imposed to offset the distortions caused by
differential treatment of indirect and direct tax systems. Even if prices do go
up for some imports, that will create new opportunities for domestic
manufacturers to compete on a level playing field, sustaining jobs and local
communities in the United States. At the same time, the bill will make U.S.
produced goods and services more competitive abroad.
2. Isn’t a border adjustable
“fee” just another name for a tax increase/tariff increase?
No. The fee is not a general,
across-the-board tax or tariff increase. Instead, it is a targeted instrument
designed to offset inequities in the international trading system that harm
U.S. producers. If the inequity is eliminated, the fee will not be collected.
3. It is a regressive tax that
will negatively impact the poor and the elderly.
The fee amounts collected on
imports will be paid out in the form of offsetting payments to U.S. exporters.
Thus, each dollar assessed on an import that may lead to higher prices for
consumers of that import will eventually result in an offset payment to U.S.
producers. This will help U.S. producers maintain competitive prices for their
products at home and abroad. It will also help sustain production within the
U.S., supporting good jobs for American workers, funding wages and benefits,
and contributing the to the local economy and tax base of communities across
the nation. It is also the case that VATs rebated on exports are often lower on
products viewed as necessities as most countries charge lower VATs on products
that are viewed as necessities
4. The logistics are too
complicated. This legislation will require new accounting methods and changes
in the IRS system.
The fee system will be less
complicated than attempting to impose a VAT tax system in the United States.
The system relies largely on concepts and definitions already used by Customs
to administer our trade laws, and it will operate on the basis of readily
available documentation supplied by importers and exporters.
5. How can you rebate something
you never paid? Aren’t you really talking about a subsidy?
The program serves only to
neutralize border-adjustable VAT taxes, not to subsidize corporations.
Exporters must provide proof of the border taxes imposed on their exports in
order to receive an offsetting payment.
6. Why not join the rest of the
world and institute a VAT tax system in the U.S.? We already have a form of
indirect tax – the state sales tax.
The U.S. has debated whether or
not to impose some sort of national consumption tax – such as a sales tax or a
VAT – a number of times in the past and decided against it for a variety of reasons.
The U.S. should not have to institute wholesale changes to its domestic tax
system simply to compete on an even footing with foreign producers. The
ultimate goal of the bill is to eliminate differential treatment of national
tax systems under international trade rules and to remove the distortions
caused by these rules.
7. This legislation is not WTO
compliant. Indirect taxes, such as the VAT, are allowed to be adjusted at the
border under the WTO, but what this bill proposes will be considered a direct
subsidy to exporters – which is WTO illegal.
The WTO rules that allow for
indirect taxes, but not direct taxes, to be adjusted at the border are based on
outmoded economic theory and do not reflect the reality faced by producers in
the global economy today, further, such rules conflict with the original intent
of GATT/WTO. With the spread of the VAT around the world, these rules are
creating an enormous distortion to the world economy, resulting in an estimated
disadvantage of $294 billion in goods trade and $85 billion in services trade
for U.S. firms, farmers, and workers.
This bill aims to ensure that WTO
rules are reformed to remedy this massive distortion. For the first time, the
bill would create an economic incentive for WTO members to finally renegotiate
WTO rules on this issue with the U.S. The bill only imposes a fee if the
negotiations are not successful.
In addition, before the deadline
for negotiations expires, the bill provides for an offset payment to U.S.
exporters of services, which fully complies with current WTO rules that do not
restrict subsidies to the service sector.
8. U.S. Corporations often pay
few or no income taxes – an inequity for our competitors.
Nations do collect different amounts of corporate income tax, just as they apply different rates of consumption taxes and property taxes. But corporate income taxes are direct taxes, which are not border adjustable – exporters do not receive rebates of these taxes and importers are not assessed with such taxes. Thus, different income 25 tax rates do not distort trade by subsidizing exports and penalizing imports. Only indirect taxes – such as the VAT – are allowed to be adjusted at the border under WTO rules. Thus, it is the differential treatment of these indirect taxes under international trade rules that distorts trade flows, and it is these tax systems which are the focus of the neutralizing measures in the bill.