The US administration has signalled its intention to move ahead with plans for what President Trump is calling ‘a once-in-a-generation opportunity’ to overhaul the US tax code, but has abandoned plans to introduce a so-called ‘border tax’
The White House has released a joint statement on tax reform signed by Treasury secretary Steven Mnuchin, the House speaker, the Senate majority leader, and the chairs of the Senate finance committee and House ways and means committee.
The statement says the two tax-writing committees are to develop and draft legislation which will be ready for consideration in committee and in Congress by the autumn.
There are no specifics about rates of personal or corporation tax in the briefing, which states that tax relief for American families ‘should be at the heart of our plan’. It suggests there will be ‘a lower tax rate for small businesses so they can compete with larger ones, and lower rates for all American businesses so they can compete with foreign ones’.
The statement says: ‘The goal is a plan that reduces tax rates as much as possible, allows unprecedented capital expensing, places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas.
‘And we are now confident that, without transitioning to a new domestic consumption-based tax system, there is 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.’
However, the statement does make clear that the Trump administration has abandoned one of its most controversial tax plans, which was a border tax on imported goods.
It says: ‘While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform.’
Commenting on the move, Glyn Fullelove, chair of CIOT’s technical committee, said: ‘Any corporate reform that focussed 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.’
