National Retail Federation (NRF), the world’s largest retail trade association, is concerned over the future of Border Adjustment Tax (BAT) and its impact on the US’ retailers. To understand the same, the Federation has recently written a letter to the House Tax-Writing Committee of the US questioning ‘how the tax reform would benefit small businesses, grow the economy and create jobs’? In its letter, the NRF has also urged the Committee to consider the potential impacts of BAT on small retailers in the country.
NRF states that small businesses account for 98 per cent of the entire retail industry, providing 40 per cent of total 42 million retail jobs in the US. Adding on, it claims that 85 per cent of small business owners believes, to thrive in the market, it is essential to source material from overseas. Therefore, applying 20 per cent BAT on imported goods might force them to slash as many as 772,000 retail jobs as the proposed tax policy will increase the cost to the consumer. The Federation estimates that BAT implementation would cost a middle-class family in the country as much as US $ 1,700 on the yearly basis. It will further result in declining sales, which will lead to a contraction in the small businesses.
“Small retailers might witness the hardest hit by the potential impact of the BAT. They do not have the economies of scale to be able to reduce the higher costs of their merchandise with the BAT imposed and are most likely to lose sales to lower-priced competition,” said David French, Senior Vice President for Government Relations, NRF.
It’s worth recalling here that NRF recently conducted a survey to take opinions of small retailers about BAT and its probable effects on retail industry in the US. The survey found that three out of five retailers forecast a negative impact on their already running tight-margin businesses if BAT is implemented.
In response to the concerns raised by NRF, Peter Roskam, Chairman, House Ways and Means Tax Policy Subcommittee, explained, “In the Ways and Means Committee, we are proposing a simplified tax code that works with, instead of against, small businesses. First off, we drop the tax rate from 44.6 per cent to 25 per cent. This means more money to hire employees, and this means more money to grow your business.”
