From the craziness that is Washington, DC these days comes an innovation may affect global business for years
When it comes to the state of the tax code, there’s a surprising amount of consensus in Washington: liberals, conservatives and every President from Bill Clinton to Donald Trump agree that the corporate tax is broken, ineffective and needs to be fixed.
The problem, in a nutshell, is that the 35% corporate tax rate is among the highest in the developed world. But because of loopholes, it produces less federal revenue, as a percentage of GDP, than most other countries’. The current system also creates an incentive for companies to perform feats of legal acrobatics, like relocating corporate headquarters and shuffling intellectual property to far-flung foreign locales, to shield their balance sheets from the IRS.
That’s where the BAT comes in. In theory, this little tax will fix those big problems. Instead of taxing corporate profits, the BAT taxes corporate cash flow. That means it doesn’t matter where a company’s headquarters are located or where its intellectual property is housed. All that matters is where it sells its products. If it sells its products in America, it pays 20% on what it makes. If it sells its products abroad, it pays no U.S. corporate tax at all. (Foreign taxes would still apply.)