The official Budget 2017 DOOM thread

[jamesbrown]

Have you read about Republicans plan for border adjusted tax? Well worth reading - it would result in dropping Corp Tax in USA from 35% to 20%, so UK would have to do a lot better than current plan of 17% in year 5 million, obvious easy way now to make up for that "loss" is increasing tax on dividends, after all people who earn dividends won't be marching in millions to Downing Street 10.

Damn right, I have. They've had this plan for a long time, and Trump seems to be coming around to the idea. Most of my clients are in the US, so I'd be pretty screwed by that. The problem is that I don't think the USD will fully appreciate to offset the effects of border adjustment (theoretically, it should rise by the same amount as the border adjustment, i.e. 25% for a 20% border adjustment). If the USD doesn't rise, it's basically a massive tax increase (indirectly) for companies like mine that export to the US. That has me more worried than the stuff going on in the UK TBH. Seem to be getting hammered from all angles at the moment, save for the strong USD....

[lilelvis2000]

for which you're paying 1500+ notes a month for, im actively looking to move now, canada seems the best option...

Already in progress for me. Closing up Ltd. in April. Moving soon after.

[AtW]

Damn right, I have. They've had this plan for a long time, and Trump seems to be coming around to the idea. Most of my clients are in the US, so I'd be pretty screwed by that. The problem is that I don't think the USD will fully appreciate to offset the effects of border adjustment (theoretically, it should rise by the same amount as the border adjustment, i.e. 25% for a 20% border adjustment). If the USD doesn't rise, it's basically a massive tax increase (indirectly) for companies like mine that export to the US. That has me more worried than the stuff going on in the UK TBH. Seem to be getting hammered from all angles at the moment, save for the strong USD....

USD appreciation is the weakest part of the plan - I think they can fix it with the Fed raising rates, which seems to be happening now. The downside of stronger USD is that US companies that export will have problems selling.

[jamesbrown]

USD appreciation is the weakest part of the plan - I think they can fix it with the Fed raising rates, which seems to be happening now. The downside of stronger USD is that US companies that export will have problems selling.

The Fed raising rates also makes USD appreciate(?) Perhaps you mean slowing down, but there's no sign of that. In principle, the border adjustment should raise revenue without increasing import costs, because any border tax should, in theory, be offset by an identical appreciation of USD, which will reduce import costs. Likewise, while USD appreciates, the exporters pay no tax on their exports and can, therefore, price their exports more competitively. In short, it should be a wash for corporates, and a revenue raiser for gov't. In reality, exporters like the defence companies are very much in favour and importers like Walmart are very much against, because they don't believe the economic theory will pan out. It's quite unlikely that the USD appreciation will fully offset the border tax.

[AtW]

Damn right, I have. They've had this plan for a long time, and Trump seems to be coming around to the idea. Most of my clients are in the US, so I'd be pretty screwed by that. The problem is that I don't think the USD will fully appreciate to offset the effects of border adjustment (theoretically, it should rise by the same amount as the border adjustment, i.e. 25% for a 20% border adjustment). If the USD doesn't rise, it's basically a massive tax increase (indirectly) for companies like mine that export to the US. That has me more worried than the stuff going on in the UK TBH. Seem to be getting hammered from all angles at the moment, save for the strong USD....

btw, the end result of this plan would be many companies choosing to incorporate in USA and book sales there, corp tax will be 20%, so why not?

Tory Scum might be forced to cut corp tax further, of course totally negated by increasing dividend taxes

[AtW]

It's quite unlikely that the USD appreciation will fully offset the border tax.

Even if it does then it won't always be at same level, in any case US consumers will have to pick up the bill, essentially Republicans are trying to introduce VAT by proxy.

[jamesbrown]

Even if it does then it won't always be at same level, in any case US consumers will have to pick up the bill, essentially Republicans are trying to introduce VAT by proxy.

Right. It is basically an attempt to "level the playing field" without implementing a VAT, which is perfectly within the scope of WTO rules (hence UK exports are outside of the scope of UK VAT without problems from the WTO). A proper VAT is the way to do it, but it's totally unsalable in the US, because it's a direct tax on consumption.

[jamesbrown]

Tory Scum might be forced to cut corp tax further, of course totally negated by increasing dividend taxes

The Republican plan is for 20%, but even that looks ambitious. I predict 25% if it goes ahead, despite Trump calling for 15%. A 15% rate is totally unachievable with border adjustment. I don't think there's a massive risk to the UK here, but it's possible that the US will spark a wave of border adjustment elsewhere (people like Lord Lawson are already calling for it), which will completely defeat the whole point for the US and risk a collapse of global trade.

[BlasterBates]

The Border Adjustment tax is a very scary prospect.

Presidents trying protectionism isn't unusual when they start, but it usually doesn't last. Both Bill Clinton and George Bush toyed with it. When the economy starts tanking they back off

[jamesbrown]

The Border Adjustment tax is a very scary prospect.

Presidents trying protectionism isn't unusual when they start, but it usually doesn't last. Both Bill Clinton and George Bush toyed with it. When the economy starts tanking they back off

Exactly. I recall Dubya taxing Steel in the early 2000s and then backing off pretty damn quickly. The problem with Trump is that he doesn't even have the pretense of sanity.

Edit. Here: https://en.wikipedia.org/wiki/2002_U..._tariff#Impact