Tax Refunds for U.S. Exporters?
Congress has been trying to find a way to replace the major tax incentives that were previously offered to U.S. exporters – the “Foreign Sales Corporation” and the “Extraterritorial Income Exclusion”. Both tax breaks were ruled to be illegal export subsidies by the World Trade Organization (WTO). Yet the major tax break that Europeans use — refunding the “Value Added Tax” — is considered legal. Now Congress is wondering whether the U.S. might be able to adopt some kind of a European-style “tax refund” approach here in the U.S.
At present, U.S. exporters must pay the VAT on products from importing nations, but foreign exporters selling in the U.S. market get their home-country VAT rebated at the border. A Congressional Committee plans to explore how this hurts U.S. exporters, especially smaller exporters, and whether there are any ways to correct the inequity through tax refunds to U.S. exporters for outbound products.
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