LEXPERT MAGAZINE
|
APRIL/MAY 2017 33
| TAX COMPETITION |
Americans to buy in the United States than
the identical car produced in the US, for
the simple reason that US dealers could not
deduct the cost of acquiring these cars from
their gross income. By contrast, where the
car is produced in the US, dealers would be
taxed less because they could deduct cer-
But is BAT going to happen? It
is impossible to predict. Congressional
leaders are largely in favour, but President
Trump appears to be leaning toward a BAT
targeted at countries whose trade policies
he finds offensive. Although he has called
a universal BAT "too complicated," he has
at the same time acknowledged that it is up
for discussion.
"As usual, we're getting conflicting mes-
sages," Citrome says. "But there are discern-
ible trends and momentums about which
Canadians should be concerned right
now." Still, Dalton Albrecht, a tax partner
at EY Law LLP in Toronto believes there's
much less for Canada to worry about if it
is in fact a targeted BAT that emerges. "If
countries are exempted, Canada should
be one of them because so far there's no
sign that [President] Trump thinks we're a
problem," he says.
Ultimately, BAT's legislative success may
depend on whether or not President Trump
and his Republican backers continue to be-
lieve and spread the dubious proposition
that the VAT systems of foreign countries
are behind the US trade deficit.
Jack Mintz, a prominent economist who
is the President's Fellow at the University of
Calgary School of Public Policy, is but one
tain costs, most particularly wages, from
their gross income.
When push comes to shove, then, in its
proposed American incarnation, BAT,
unlike VAT and GST is, in effect, a tariff.
Bearing in mind that the United States
is Canada's largest trading partner to the
tune of some $715 billion annually, the im-
pact of BAT could be staggering.
Barclay's economists have estimated that
companies, including Canadian compa-
nies, that have their supply chains outside
the US and export goods into the US would
need profit margins of 20 per cent just to
break even. It's true that Canadian and
other foreign companies that have more of
their supply chains in the US and do a lot of
exporting might find the proposed system
more advantageous.
"If [President] Trump succeeds in pushing his tax proposals
through, it will affect the entire matrix of decision-making for
Canadian multinationals, including how to finance US operations
and where to locate operations that generate profits."
Drew Morier Osler, Hoskin & Harcourt LLP
In Washington, DC, the
Canadian flag flies from
the embassy across
fromt he US Capitol
(right). Political leaders
in the UK and US have
been vocal about
attracting business with
lower tax rates.
