The Trump administration is promising sweeping reforms to the corporate tax system, in a move that could have big consequences far outside the US. A main point of reference is a corporate tax blueprint drawn up by Republican members of the House of Representatives — in particular a proposal for a “border adjustment tax”. The idea has sparked intense opposition from parts of the US business community. But proponents say it would boost investment in the country. Last week the White House suggested that such a tax would be one way to finance the wall Donald Trump has promised to build on the frontier with Mexico.
What is in the proposal?
Under the border adjustment proposal, companies would no longer deduct the cost of imported goods from their taxable profits, while exports would not be taxable. While many details remain unclear, taxing spending on imports instead of taxing sales of exports would be a winner for a country with a large trade deficit. The Tax Foundation, a Washington think-tank, says the border adjustment tax would be expected to raise $1tr over a decade. But other aspects of the plan are likely to reduce business tax revenues overall, reinforcing the decline in corporate tax revenues as a share of the economy over the past 50 years