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Germany Threatens WTO Action Over Border Adjustment Tax

by Mike Godfrey,, Washington
Monday, March 20, 2017

German Economy Minister Brigitte Zypries has said Germany could begin legal action against the US if the Border Adjustment Tax (BAT) is introduced.

In an interview with Deutschlandfunk on March 17, 2017, Zypries was asked how Germany would respond if the US were to introduce the measure, which was included in the blueprint drawn up by the Republican Party.

Zypries stated that she anticipates the levy may not be introduced, given that Germany exports plant and machinery key for US productive activities and because of the threat of action through the World Trade Organization (WTO).

The BAT is intended to remove a competitive disadvantage for US exporters that arises from sales tax being embedded, without credit, in US goods sold overseas. Meanwhile exporters in countries that levy a value-added tax receive zero-rated treatment for their exports, allowing them to recover input value-added tax. This means that there is no embedded foreign sales tax in supplies to the United States, whereas US goods sold overseas include both US sales tax and may be subject to value-added tax.

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