I posted a while back on the treatment of different tax systems (direct vs. indirect systems) under trade rules. Here's an FT op-ed that makes the case that the current system is unfair to U.S. producers. The authors argue as follows:
In 2005, 137 nations accounting for 94 per cent of trade with the US had some form of border-adjusted taxes on manufactured goods and services. By contrast, the US has direct taxes, such as the corporate income tax, which is precluded from being refunded on US exports or assessed on imports under World Trade Organisation rules.
The net effect is an unfair disadvantage for US companies and their staff, as the goods they produce and export are hit with taxes abroad, while foreign goods coming into the country are not. The additional embedded tax burden for US companies exporting goods is at least $100bn annually.
They then propose two steps to fix the problem:
First, the US must aggressively engage the Europeans to repeal the distinction between direct and indirect taxes. This distinction is a charade that was established in the 1960s and never challenged in a meaningful way.
...
Second, Congress should move our corporate code towards a consumption-based tax. ...
There was a nice discussion of this issue in reaction to my original post (see the comments section there). I hear this argument raised every now and then, but I can't figure out whether it will gain traction any time soon or just fade away.
