The US government has issued a press statement announcing its decision not to proceed with plans for a ‘border adjustment tax’, which had been a source of concern among US multinationals and companies around the world. The proposed tax would have targeted goods and services consumed in the US, giving corporate deductions for certain domestic expenditure, while denying any deductions for imports. The statement said that ‘without transitioning to a new domestic consumption-based tax system’, the US government now sees ‘a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the US tax base’.
Welcoming this announcement, Glyn Fullelove, chair of the CIOT’s technical committee, said: ‘The US tax system is in need of reform, particularly the way it treats corporations. Notwithstanding its effect on the US, it encourages behaviours among US-based multinational companies, such as piling up cash in offshore locations which distort the international tax system. We would encourage reforms to eliminate such distortion.
‘Any corporate reform that focused on border tax adjustments or destination-based cashflow taxes would have replaced one distorting system with another, and it is in our view sensible that this route is not being followed. A reform built around the OECD’s principles set out in the concluding reports to the BEPS project would give the best chance of a fair and coherent international tax system being created, without huge upheaval worldwide.’
The US government has issued a press statement announcing its decision not to proceed with plans for a ‘border adjustment tax’, which had been a source of concern among US multinationals and companies around the world. The proposed tax would have targeted goods and services consumed in the US, giving corporate deductions for certain domestic expenditure, while denying any deductions for imports. The statement said that ‘without transitioning to a new domestic consumption-based tax system’, the US government now sees ‘a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the US tax base’.
Welcoming this announcement, Glyn Fullelove, chair of the CIOT’s technical committee, said: ‘The US tax system is in need of reform, particularly the way it treats corporations. Notwithstanding its effect on the US, it encourages behaviours among US-based multinational companies, such as piling up cash in offshore locations which distort the international tax system. We would encourage reforms to eliminate such distortion.
‘Any corporate reform that focused on border tax adjustments or destination-based cashflow taxes would have replaced one distorting system with another, and it is in our view sensible that this route is not being followed. A reform built around the OECD’s principles set out in the concluding reports to the BEPS project would give the best chance of a fair and coherent international tax system being created, without huge upheaval worldwide.’
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