Washington Retail Insight

VAT Among Top Issues at NRF Taxation Committee Meeting

By J. Craig Shearman
Washington Retail Insight
July 22, 2010

Continued talk of a national Value Added Tax was among the top issues as members of the NRF Taxation Committee met in Washington this week.

The two-day meeting came less than a week after Erskine Bowles, co-chairman of President Obama’s deficit reduction commission publicly voiced support for enactment of a consumption tax. Speaking at a July 14 conference in Washington, the former Clinton Administration chief of staff said he favors simplifying the income tax and reducing both personal and corporate rates. He also said the country desperately needs more revenue and that it should come from a broad-based consumption tax.

Taxation Committee members spent Monday afternoon addressing VAT and other pressing tax issues with staff members at the Senate Budget and Finance Committees, and met with deficit commission Chief Tax Counsel Josh Odintz at NRF headquarters on Tuesday.

Odintz didn’t address Bowles’ comments but said, “Everything is on the table. Nothing has been removed.”

Odintz said the panel – officially known as the National Commission on Fiscal Responsibility and Reform – is confident it will meet its December deadline to present deficit reduction recommendations to Congress. He said the commission would welcome seeing an NRF study on the economic impact of a VAT that is currently being conducted.

Committee members told Odintz retailers are worried that a VAT would worsen consumer spending levels that have already been dampened by the recession of the past two years. One said higher prices that would come with a VAT could have a psychological effect that would discourage spending even if tax reform was structured in a way that ultimately left consumers with more money in their pockets.

Ernst and Young economists Bob Cline and Bob Carroll updated the committee on progress of the study, which is looking at the impact of a VAT on consumer spending, employment and gross domestic product. Preliminary numbers show a negative impact on each of those categories, they said.

The committee also addressed uncertain tax positions, sale leasebacks, economic substance, gift cards, vendor allowance, repairs and audits, among other issues, and met with officials from the Internal Revenue Service chief counsel’s office.

© 2010 National Retail Federation