Business leaders in the world’s biggest economy will be discussing US Treasury’s latest tax reform proposal, including the lowering of corporate income tax to 28% and introduction of a so-called business activity tax, which would act as a VAT.

The proposals are part of a tax reform set out in a study, entitled ‘Approaches to Improve the Competitiveness of the US Business Tax System for the 21st Century’ launched by Treasury Secretary Henry Paulson yesterday.

The cut to 28% would require elimination of all special preferences to make the change revenue neutral. The business activity tax, compared to a VAT, would remove interest costs from the tax base and would improve USA’s economic performance by up to 2.5%, according to Reuters.

Treasury officials admitted at a news conference the likelihood was remote of moving any legislation on the issue during the current Bush administration, but they wanted to ‘lay the groundwork for future debate on the issue’.

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