Brady defends border adjustability as WTO-compliant, but expects outcry from other countries

January 25, 2017


Ways & Means Committee Chairman Kevin Brady (R-TX) defended the House GOP's tax blueprint -- particularly its border adjustability provision -- by saying he is “very confident” the bill would withstand World Trade Organization challenges if it became law, though he expects other countries to criticize the move nonetheless.

[Daily News| January 24, 2017 |Inside US Trade]

“I'm convinced that this is WTO-consistent,” Brady on Jan. 24 told a crowd of business leaders at the U.S. Chamber of Commerce, citing “three key tests that the WTO uses in making these determinations.”

He did not elaborate on those tests. But a Ways & Means aide provided an explanation: “The WTO has not examined a destination-based cash flow system. In general, in analyzing a provision, the WTO will examine whether it constitutes a subsidy, whether it is otherwise a prohibited export subsidy, and whether it is consistent with the WTO national treatment principle.”

“So looking at the three key tests I'm very confident that we meet all three,” Brady said in his Chamber speech. “In our proposal we are moving away from that income tax based on where the products are produced or where profits are booked to a very simple cash flow system based on where it's consumed. It is economically equivalent and trade equivalent to the value-added tax.”

More than 100 countries have a value-added tax system, Brady noted, and Republican leaders in the House argue that reforming the U.S. tax system according to the GOP blueprint would eliminate the competitive disadvantage that U.S. businesses face and disincentivize moving operations abroad.

Read more at Inside US Trade

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