The US National Retail Federation (NRF) has said that retailers would 'have no choice' but to pass the higher costs on to consumers if Congress passes a proposed $1 trillion border adjustment tax.
The new tax could be introduced as part of a larger tax reform, but the NRF senior vice president for government relations, David French, believes that it will cause the tax burden on retailers to sky rocket.
In a statement submitted to the House Ways and Means Committee ahead of the hearing on the tax proposal, French said, “Under this proposal, many retailers will have a tax burden that is larger than their profits. […] Obviously, they will have no choice but to pass the tax cost forward to their customers."
“Small businesses may be particularly vulnerable to the impact of the border tax on prices,” he added.
Higher Taxes, Less Jobs
The United States has one of the highest corporate tax rates in the world, the NRF reports. It said it has led the retail industry in advocating for comprehensive tax reform that would ‘broaden the tax base and lower the corporate tax rate’.
The border tax plan, proposed by House Speaker Paul Ryan and Chairman Kevin Brady, would create a 20% tax on imported goods by ending retailers ability to deduct the cost of merchandise they import. This would result in retailers being taxed nearly the full selling price of imported merchandise - amounting to $1 trillion in extra costs over the first 10 years.
Analysis by NRF and its member companies reveal that the proposed tax would drive up costs, reduce profits and exceed any benefits from a lower rate. The NRF estimates it would require price increases of 15 percent or more to retain profitability, which it said would effectively create 'a new tax paid by consumers’.
The NRF says that the tax would also risk millions of retail-supported jobs. Small business, which comprise of 90% of the industry and 40% of its jobs, would be at major risk of being taxed out of business.
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Aidan O’Sullivan. Click subscribe to sign up to ESM: The European Supermarket Magazine.
