Newsletter

April 8, 2011 - Congressional Staffers Tell NRF Tax Committee VAT is Unlikely

Top aides from Congress’s two tax-writing committees told NRF members this week a Value Added Tax isn’t likely to come out of tax reform negotiations that are expected to extend through the 2012 presidential elections.

“I think we’re going to have to have one more round of base broadening and rate lowering before we look at a VAT,” Senate Finance Committee Staff Director Russ Sullivan said. “I don’t see the members being willing to do that yet.”

A House Ways and Means Committee staffer speaking on background said various forms of consumption taxes could be discussed, but reform of the existing tax structure is the more likely outcome in his opinion.

NRF has long opposed a VAT because of the devastating effect it would have on the economy, and last year commissioned a study that found a VAT would cause the loss of 850,000 jobs, reduce GDP and bring a permanent drop in consumer spending.

Sullivan and the Ways and Means representative spoke at NRF headquarters on Thursday as top tax executives from most of the nation’s major retailers gathered in Washington for the spring meeting of the NRF Taxation Committee.

Tax reform is the top priority for Ways and Means Chairman Dave Camp, R-Mich., who has held two hearings on the topic since taking charge of the committee in January. While most of the committee’s attention has focused on personal taxes, the panel will begin addressing business taxes soon. The Ways and Means staffer praised NRF for coming in early to talk about the importance of corporate tax reform and said businesses should feel free to approach the committee to offer input.

Camp told the Wall Street Journal recently he wants to lower the top rate to 25 percent for both personal and corporate income taxes, down from the current 35 percent.

While the House and Senate will both hold hearings this year and next, Sullivan said tax reform isn’t likely to be enacted unless a presidential candidate makes it a top campaign priority and then pushes the issue after being elected, similar to the 1986 reform enacted under President Reagan.

In addition to the update on congressional tax reform efforts, two Treasury Department staff members spoke about recent and future tax guidance affecting retailers.

Committee members thanked the Treasury officials for their diligence in working through issues NRF raised concerning Internal Revenue Service challenges of tax treatment of gift cards. The issues were ultimately resolved through the issuance of Revenue Procedures 2011-17 and 2011-18. Treasury staff acknowledged that NRF submissions on the issue were extremely helpful in determining a basis for guidance and asked whether there were any additional gift card issues where clarification may be needed. They also discussed their work on regulations governing repairs and said an example NRF submitted on the remodeling of a chain retail store was very helpful in providing a model of what needs to be addressed in future regulations.

© 2011 National Retail Federation