The President's Advisory Panel on Federal Tax Reform endorsed a proposal that would end the corporate tax deduction on imported goods, and the National Retail Federation isn't happy.
NRF president/CEO Tracy Mullin sent a letter dated Oct. 20 to President Bush asking him to reject the proposal, which would eliminate the income tax deduction for all imports, including consumer goods and raw materials.
The letter noted that $648 billion in general merchandise consumer goods were imported to the United States in 2004, according to the U.S. Census Bureau. At the proposed 32 percent corporate tax rate, that figure would result in $207 billion in new tax revenue that importers “would be forced to pass on to consumers,” according to a press release from the NRF.
The proposal will be included in a report to be submitted Nov. 1 to Treasury Secretary John Snow.
Economists on the advisory panel have said that floating exchange rates would compensate for the loss of the deduction, according to the press release. The NRF contends that such an adjustment could take a long time to achieve and that many countries that are major sources of imports don't have floating currencies.
The retail trade association is also concerned that the elimination of the deduction may violate World Trade Organization rules and could expose U.S. exports to WTO-sanctioned trade retaliation.
Chantal Todé covers catalog and retail news and BTB marketing for DM News and DM News.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters