US Treasury moots lower corp tax, VAT

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
to Improve the Competitiveness of the US Business Tax System for the 21st
’ 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

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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