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Fundamental Tax Reform and Border Tax Adjustments


Author Info

  • Gary Clyde Hufbauer

    (Peterson Institute for International Economics)

  • Carol Gabyzon


This study makes a novel contribution to the ongoing fundamental tax reform debate with its investigation of how proposed reform will affect the international economic position of the United States and especially whether they could be adjusted at the border. It focuses on the business component of the three most popular proposals: the national retail sales tax, the Nunn- Domenici Unlimited Savings Allowance Tax (USA Tax), and the flat tax. If the taxes are adjusted, as the authors propose, they can be rebated on exports of goods and services and imposed on imports. To determine whether adjustment is permissible, the study examines the international rules of governing border tax adjustments. The existing rules distinguish between direct and indirect taxes, between goods and services, and between exports and imports. The authors conclude that there is no problem in adjusting a national retail sales tax on internationally traded goods and services. While the outcome is not cut-and-dried, the business component of the USA Tax is probably also adjustable, both on goods and services and on exports and imports. The biggest international questions will arise if border adjustments are applied to exports of goods under the flat tax. The authors suggest that changes in the international rules may be needed to permit border adjustments for the flat tax.

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Bibliographic Info

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This book is provided by Peterson Institute for International Economics in its series Peterson Institute Press: Policy Analyses in International Economics with number pa43 and published in 1996.

ISBN: 978-0-88132-225-5
Handle: RePEc:iie:piiepa:pa43

Note: Policy Analyses in International Economics 43
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Cited by:
  1. Yan Dong & John Whalley, 2008. "Carbon, Trade Policy, and Carbon Free Trade Areas," NBER Working Papers 14431, National Bureau of Economic Research, Inc.
  2. repec:spo:wpecon:info:hdl:2441/faqom67ai2qsojk9j15c04u8j is not listed on IDEAS
  3. Roland Ismer & Karsten Neuhoff, 2007. "Border tax adjustment: a feasible way to support stringent emission trading," European Journal of Law and Economics, Springer, Springer, vol. 24(2), pages 137-164, October.
  4. Ben Lockwood & John Whalley, 2008. "Carbon Motivated Border Tax Adjustments: Old Wine in Green Bottles?," NBER Working Papers 14025, National Bureau of Economic Research, Inc.
  5. Benjamin Dachis, 2009. "A Clean Canada in a Dirty World: The Cost of Climate-Related Border Measures," e-briefs, C.D. Howe Institute 90, C.D. Howe Institute.


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