By Dan Bolton
In May the National Coffee Association (NCA) mobilized its ranks to combat a border adjustment tax (BAT) under discussion but not formally detailed in Congressional legislation.
NCA director of external relations & communications Joe DeRupo explains that while many corporations are eager for relief from the highest corporate tax rates in the world “with more than 90% of coffee being imported, the cost to them from a border adjustment tax could far outweigh a reduction in the corporate tax rate.”
“It would effectively mean a new, 20% tax on everyone’s bottom line, or a pass-through to consumers that could hurt demand,” according to DeRupo.
NCA c.e.o. William “Bill” Murray led a “fly-in” delegation to Washington D.C. May 24-25 to meet with members of Congress carefully selected based on the economic impact of the coffee industry in the state or district they represent.
BAT is part of larger tax reforms seen as essential to offset a reduction in revenue should corporate taxes be cut to as little as 15%, compared to the 35% now paid. Border taxes may be levied at a blanket rate unlike the selectively applied 24% tariff on Canadian soft lumber imposed under current US administration. Canada, which supplies 30% of the wood used by American building contractors, retaliated.
The impact is similar to tariffs because BAT applies to imports and not exports. But it is usually imposed to balance trade deficits with countries that themselves impose a border adjustment tax on imports. The tax does not impose new taxes on imported goods, but rather aligns rates with tariffs on exports, said DeRupo. The border adjustment tax would effectively extend current taxes to imports, although they would reflect the lowered tax rate. It would apply to imports from all countries and not just Mexico.
Whether levied as a tariff or tax, unless coffee is exempted, a border tax will cost jobs, not increase employment “so, the protectionist argument to make imported goods more expensive to favor domestic products doesn’t hold water re coffee,” said DeRupo.
The coffee industry directly employs 940,850 workers who earned $27.1 billion in wages in 2015, according to NCA. The industry is concentrated in regions that include the Pacific Northwest; Houston, Texas; New Jersey, and Louisiana. A dozen NCA board members and staff pre-arranged meetings with 70 members of Congress aligned with the districts in which they have business operations and/or who sit on key committees that influence BAT.
In the past NCA has hosted meetings to familiarize new members of Congress and key committee members with general issues faced by the industry. The fly-in model is more focused, said DeRupo. It remains unclear whether BAT will end up law as the US administration is apparently re-thinking its stance.
The impact of the meetings were positive according to DeRupo, “as an industry, we have a persuasive argument why no new import levies should be imposed on coffee.”