Fault lines inside the corporate world are emerging over a proposed rewrite of the U.S. tax code, pitting importers against exporters.
At the heart of the fight is a Republican plan in Congress that would impose corporate taxes on imports while eliminating them from exports, a move that would upend decades of tax policy.
The proposed shift in effect would curtail existing incentives for U.S. companies to move profits and operations abroad, but it would also pose new challenges for some global businesses. Retailers selling imported products and refiners using imported oil could be hardest hit, while some exporters could see their tax bills vanish.
“You’re going to have the big importers fighting the big exporters,” said Lisa Zarlenga, a former U.S. Treasury official and now a partner at international law firm Steptoe & Johnson LLP.
The proposal is part of House Republicans’ blueprint for overhauling the entire U.S. tax code and has been around since June. While still not legislation, it has gained fresh momentum—and scrutiny from corporations—since the November election sweep gave the GOP the chance to advance its ideas with its newfound one-party control of Congress and the White House.
Lawmakers must now weigh competing business interests to achieve the country’s first major tax revamp since 1986. “Tax reform always hits different industries differently,” said Republican economist Douglas Holtz-Eakin. “It’s the ability to rise above those differences that makes tax reform hard.”
Other crucial elements of the business-tax plan would also be a major departure for the U.S. and include dropping the corporate tax rate to 20% from 35%. Companies would also be able to write off capital expenses immediately but couldn’t deduct net interest.