Feigenbaum Law

US Government Will Not Pursue Border Adjustment Tax

Corporate Tax Planning
July 31, 2017

Canadian businesses have had a piece of good news in the recently announced “shared vision” for US tax reform, as the US government announces that it will not pursue a Border Adjustment Tax (“BAT”) as part of their broader tax reform efforts.

Border Adjustment Tax will not be part of tax plan

A small group of Republican leaders released a very brief, relatively undefined, Joint Statement on Tax Reform late last week. Among other things, the statement confirmed that the BAT threatened by the US government will not be part of their tax reform plans, stating, “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.”

As we discussed in an earlier post, the BAT was very controversial, and would have imposed a flat tax on all imports in to the United States. Opponents of the tax argued that consumers would end up paying the price of the tax, as retailers and importers passed the added costs down the supply chain.

US tax reform to focus on lowering tax rates for corporations, wealthy individuals

Instead, the announcement made vague statements about lowering taxes “as much as possible” and encouraging US businesses to repatriate “jobs and profits trapped overseas.” Dropping the BAT means that legislators will be looking for other ways balance out the proposed 20% lower tax rates for corporations, and decreases in rates for wealthy taxpayers.

Legislation on the proposed tax reform is expected as early as this fall. With 20% of 2015 Canadian GDP attributable to goods imported by the United States, Canadian companies that rely on US business can breathe a bit easier for now.

Legal and tax advice for businesses operating in Canada and the United States

Feigenbaum Tax Law exclusively represents clients that have cross-border tax and financial concerns. Our team of accountants and lawyers have backgrounds in both Canadian and US tax law, and closely follow developments in US tax reform.

Our tax plans are tailored to each individual client’s needs. If your business operates in the United States, or you are considering expanding across the border, we can provide invaluable advice about potential tax and business implications. Contact us online, or call our office toll free at (877) 275-4792 to make an appointment.


Tagged: BAT, border adjustment tax, tax reform