Senate tax plan will not include controversial 20% excise tax on imports by multinational companies: Sources

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Senate majority Leader Mitch McConnell (R-KY) (R) talks to reporters following the weekly Republican policy luncheon in the U.S. Capitol November 7, 2017 in Washington, DC.

The Senate tax plan is not expected to include a controversial 20 percent excise tax on imports by multinational companies, according to three people briefed on the issue.

The tax is a critical revenue raiser in the House bill — worth about $155 billion over a decade — and applies to purchases by U.S. subsidiaries of multinational businesses from their foreign counterparts. Among the most vocal opponents of the new fee is the conservative advocacy group Heritage Action, which called it a “backdoor border adjustment tax.”

The fee covers both intangible goods such as intellectual property as well as consumer parts. But unlike the border adjustment tax — a proposal that Republicans have discarded — the transactions must occur within a single parent company.

Business groups such as the Organization for International Investment also fear the tax could disrupt international supply chains and raise costs for multinational companies — and ultimately consumers.

“It’s an extraterritorial reach into global supply chains that were never part of the U.S. tax base,” OFII President Nancy McLernon said. “It will have a disproportionate impact on international companies that have made a deliberate decision to invest and create jobs in the United States.”

Last week, House Ways and Means Committee Chairman Kevin Brady defended the tax as a crucial to ensuring that companies do not shift profits overseas. He said that the border adjustment tax was abandoned months ago and that the excise tax in the current bill bears no resemblance to that proposal.

“It’s nowhere near this,” he told reporters.