Border-adjusted tax chills investment at the border

Border-adjusted tax chills investment at the border

The border-adjusted tax proposed by president Donald Trump worries to the industry and many investors have hold their projects until the new rules are published, said Cesar Ochoa, partner at EC Legal.

“This is not an ordinary tax created to discourage imports from Mexico. This situation creates uncertainty,” he explained.

The lawyer expressed he is aware at least of 3 companies holding back their investment until the new fiscal policy is approved in the U.S.

The proposal made by president Trump includes to put a tariff of 20% on all imports from Mexico, and a tariff of 35% on all imports from China.

A border adjustment tax is a short name for a destination-based cash flow tax (DBCFT). It is a value-added tax levied on imported goods. Exported goods are exempt from tax, while imported goods sold domestically are subject to the tax.

The border adjustments would strongly discourage the shifting of profits and activities offshore and eliminate incentives for corporate inversions, experts said.

The complexity of this subject was explained by Ochoa in the most recent Mexico´s Manufacturing Supply Chain Summit celebrated in El Paso in late February. During this event, more than 1,000 people visited the 150 booths and share their work experience with trade exports, while other attended the conferences.

Nancy Gonzalez/MexicoNow

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