4 ms·

>[1] https://en.wikipedia.org/wiki/Border-adjustment_tax https://en.wikipedia.org/wiki/Border-adjustment_tax basically it shifts the tax burden from multinatio

by trhway 5y ago

>[1] https://en.wikipedia.org/wiki/Border-adjustment_tax https://en.wikipedia.org/wiki/Border-adjustment_tax basically it shifts the tax burden from multinationals onto the domestic consumers (and domestic producers for domestic market) and increases the tax on otherwise cheap foreign import like from China. No wonder the initiative didn't make it - while the government and multinationals are always happy to hit the consumers, that one is really too much. >the solution there is to only deduct domestic expenses it does nothing. A multinational will always be able to shift franchise fees, IP property leases, etc. so that would become "domestic expenses" where it will reduce the taxes most. Global approach like the minimum tax rate is an adult step of recognition of reality of the borders being borders only for small players.

throwaway34241 5y ago
> increases the tax on otherwise cheap foreign import like from China The domestic currency is supposed to appreciate in value in proportion to the tax, so for example 1 US dollar buying 20% more Yuan, which cancels out a 20% tax (although I have to admit this is not as intuitive as the other parts, so I'm trusting the economists to do the math there). I'm not sure if the Yuan specifically is a good example, since the Chinese government controls the exchange rate politics might be more important than economics there. > and domestic producers for domestic market If you have a pure domestic business, wouldn't you just deduct your domestic expenses and pay tax on what's left over? That's basically what happens now, so I don't see how it would make a difference. > A multinational will always be able to shift franchise fees, IP property leases, etc. so that would become "domestic expenses" where it will reduce the taxes most. You could set up a domestic subsidiary, but now that subsidiary will have to pay the tax. If it's not a domestic subsidiary, then you have to pay the tax (since you can't deduct it). I get that in the current system it's very easy to do these things, but can you explain in a little more detail how this would work with the border tax?

by trhway 5y ago

throwaway34241 5y ago

> increases the tax on otherwise cheap foreign import like from China The domestic currency is supposed to appreciate in value in proportion to the tax, so for example 1 US dollar buying 20% more Yuan, which cancels out a 20% tax (although I have to admit this is not as intuitive as the other parts, so I'm trusting the economists to do the math there). I'm not sure if the Yuan specifically is a good example, since the Chinese government controls the exchange rate politics might be more important than economics there. > and domestic producers for domestic market If you have a pure domestic business, wouldn't you just deduct your domestic expenses and pay tax on what's left over? That's basically what happens now, so I don't see how it would make a difference. > A multinational will always be able to shift franchise fees, IP property leases, etc. so that would become "domestic expenses" where it will reduce the taxes most. You could set up a domestic subsidiary, but now that subsidiary will have to pay the tax. If it's not a domestic subsidiary, then you have to pay the tax (since you can't deduct it). I get that in the current system it's very easy to do these things, but can you explain in a little more detail how this would work with the border tax?