Border Tax Adjustments

Border Tax Adjustments

Summary of Border Tax Adjustments

A refund or rebate of indirect taxes on merchandise, such as sales or value added taxes, when the goods are exported. Such rebates are authorized under the General Agreement on Tariffs and Trade (read about the GATT for further details); rebate of direct taxes, however, is not permitted under the Agreement.

(Main Author: William J. Miller)

Border Tax Adjustments and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Border Tax Adjustments: The remission of taxes on exported goods, including sales taxes and value added taxes (Sec. 11), in order to ensure that national tax systems do not impede exports. The GA n permits such adjustments for indirect taxes –based on the economic assumption that such taxes are largely passed on to consumers –but not for direct taxes (e.g., income taxes assessed on producing firms). The United States makes little use of border tax adjustments since the federal government relies more heavily on income (or direct) taxes than do most other countries.


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