IIEL Issue Brief Series - Jennifer Hillman Authors Issue Brief on Ryan-Brady Tax Plan & WTO Law

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Why the Ryan-Brady Tax Proposal Will Be Found to be Inconsistent with WTO Law The tax-reform plan released by Speaker of the House Paul Ryan and House Ways and Means Committee Chairman Kevin Brady aims to improve our corporate tax system by, among other things, taxing companies based on where

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Why the Ryan-Brady Tax Proposal Will Be Found to be Inconsistent with WTO Law

The tax-reform plan released by Speaker of the House Paul Ryan and House Ways and Means Committee Chairman Kevin Brady aims to improve our corporate tax system by, among other things, taxing companies based on where they sell their goods, not the corporation’s home or the location of its production facilities.  As part of such reforms, companies would pay taxes on their U.S. sales revenues, with deductions permitted for the cost of input materials and labor, along with exclusions for the value of export sales.

Although policymakers rarely need to take the World Trade Organization (WTO) or its rules into account when devising tax policy, the proposal as outlined would have significant WTO implications.  In this Issue Brief, Jennifer Hillman, a former Chairman of the WTO’s Appellate Body, argues that, as currently described, the plan’s taxes on imports are a clear violation of WTO rules and the rebates or exclusion from taxes for exports could pose challenges as well.  As a result, the plan risks significant litigation, retaliation from our trading partners, possible additional duties on U.S. exports, and carries the potential to start a trade war.  As a result, reforms to the corporate tax system should be scrutinized and undertaken carefully.

Prior IIEL Issue Briefs:

Renminbi Internationalization and Systemic Risk, in which IIEL Faculty Director and Williams Research Professor Chris Brummer argues that China’s renminbi strategy introduces novel systemic risks to the global financial system, including a potentially inadequate provision of renminbi liquidity, a regulatory race to the bottom between offshore RMB-hubs, and significant transmission belts of financial risk to even non-renminbi markets.  To mitigate these risks, he argues for a policy recipe of stronger Mainland macroprudential oversight, transparent countercyclical capital account reforms and credible commitments on the part of the government to refrain from competitive currency devaluations.

IIEL’s inaugural Issue Brief on Shadow Banking was penned by Amias Gerety, then-Acting Assistant Secretary for Financial Institutions, U.S. Department of the Treasury.

If you are interested in having IIEL publish your analysis of international trade, monetary affairs, financial regulation, tax or any major area impacting the laws governing the global economy for our thousands of high-level readers, please send your submission of approximately 5,000 words to lawiiel@georgetown.edu.  We are proudly nonpartisan and seek only outstanding ideas worthy of sharing with our intellectual and leadership community.

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The Institute of International Economic Law is the focal point for the study of international economic law at Georgetown University.

It is also one of the leading centers for international economic law and policy in the world.

Originally focused on trade, the Institute now boasts leading capabilities and international renown in a range of areas including investment and financial regulation, tax, business and monetary law. The Institute actively approaches these fields as interrelated and at times overlapping policy spheres that impact how law is devised, practiced and enforced.

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