Border Adjustability a 'Radical Change,' Could Significantly Harm Toy Industry, Group Says
A “radical change to the corporate tax structure” such as the border adjustability elements of the House GOP tax plan could have a significant negative impact on the U.S. toy industry, most of whose products are imported, said Toy Industry Association (TIA) President Steve Pasierb in a letter to members (here). "While representatives are hearing the concerns, momentum is going in the wrong direction (for us), as it fits in with current rhetoric to bring manufacturing back to the U.S.,” the association said. “However, the U.S. toy industry was never an industry that wholly relied on U.S. manufacturing.” Furthermore, TIA pledged to “hit the ground running” next year to ensure that any forthcoming House tax reform legislation doesn’t include border adjustability elements, noting: “We won’t rest and we have powerful allies.” The House GOP plan would exempt exports from taxation, but tax imports (see 1612010056).
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Trade will be the group’s top priority in communications with the incoming Trump administration and new Congress members, TIA said. The group’s next steps include expressing concerns about border adjustability to the incoming administration’s trade transition team and meeting with all Senate Finance Committee and House Ways and Means Committee member offices to “re-educate” each on toy industry trade issues and economic impacts, the group said. TIA is part of an import group coalition that raised concerns about border adjustability in a Dec. 13 letter to Ways and Means (see 1612140046). The association also said it will highlight priorities for the incoming Trump administration to consider as it eyes nominating a new U.S. Trade Representative and other key trade officials.
In his letter, Pasierb asks TIA members to provide the group information about the impact that the House GOP’s border adjustability proposal will have on their businesses if enacted. TIA wants to know how much of its members’ inventories are imported, and what their effective tax rate would be if they can’t deduct import costs, Pasierb said. “My simplified view is that elected officials know either pain or pleasure: ‘Will any issue (or group, or meeting, etc.) either help me in what I seek or will it cause me pain – and how much pain?’” Pasierb wrote. “We are fully prepared to work productively or be a royal, boisterous, media-friendly pain in the backsides of people who would take away children’s happy birthdays, steal Christmas and destroy quality U.S.-based jobs. And no one wants to have to explain to their children why Santa was put out of work.”
Ways and Means Committee Chairman Kevin Brady, R-Texas, recently pledged that "key" border adjustability provisions will stay in the House GOP blueprint (see 1612190022). The committee released a statement (here) Dec. 21 describing the border adjustability proposal as an end to the self-imposed "Made in America" tax on U.S. exports and a "bold solution" to help businesses and workers compete. Border adjustability should be implemented to give U.S. workers and job creators a fair shot, incentivize investment and job creation in the U.S., and streamline tax rules, the statement says. "Our major international competitors stopped taxing their own exports a long time ago," the committee said. "Now, it’s America’s turn to do the same. Ending the self-imposed 'Made in America' tax on U.S. exports is a win for our economy and for Americans of all walks of life."
Meanwhile, a Deloitte survey of 105 chief financial officers showed that 68 percent of them “need more information or aren’t sure” whether the border adjustability consumption tax would have a positive or negative effect on their company, Deloitte said in a press release (here). The poll was taken during Deloitte’s 20th annual CFO Vision event held Nov. 16-18 in Washington. The poll indicated that 19 percent of participating CFOs said the plan would “likely be very good” for their companies, while 13 percent said it would “likely be very bad.”