ABA Tax

AMERICAN BAR ASSOCIATION
SECTION OF TAXATION

REPORT TO THE HOUSE OF DELEGATES

Recommendation

RESOLVED that the following resolutions adopted by the ABA House of Delegates on February 11, 1986 are rescinded.

RESOLVED that it is the position of the American Bar Association that if the Congress of the United States should impose a value added tax of general application (whether denominated as a Business Transer Tax or otherwise), it should:

(i) employ the tax credit method of avoiding duplication of tax; i.e., the tax due on goods and services sold should be diminished by a credit for VAT paid on purchases; and

(ii) levy the tax at a single uniform rate, with a zero rate for exports and certain necessities, and as few exemptions as possible.

FURTHER RESOLVED that whether the Business Transfer Tax such as S. 1102 now proposed for consideration in the Congress employs the tax credit method referred to above or the subtractive method (tax levied on sales receipts less selected expenses), the Section is authorized to render technical assistance to the staffs of Congressional members and committees, and to the U.S. Treasury and Internal Revenue Service, with respect to the Business Transfer Tax and its variants.

FURTHER RESOLVED that the Section of Taxation is authorized following consultation with such Sections as the President may specify to urge on the proper committees of Congress provisions that achieve the results stated in the first resolution above.

REPORT

The current policy was adopted primarily as a response to the introduction in Congress in 1985 of a proposal for a "subtraction method" format for a multi-stage value-added tax which differs from the more familiar "credit method" used in foreign VATs. The policy expresses a preference for the credit method.

Since the mid-1980s, the range of alternative federal tax system proposals that would apply to aggregate consumption in the United States has broadened significantly. Included currently are the familiar single-stage sales tax, the "flat tax" and both formats for the multi-stage value-added tax. The Section of Taxation of the American Bar Association expects to be asked for technical advice and assistance by the Congress and the Treasury on these and other alternative systems during future tax reform discussions. Because the current policy explicitly mentions only two systems, it could be interpreted to prohibit comments on other systems, thus leaving the Section of Taxation with no ability to contribute its members' expertise to substantial portions of a major tax policy debate.

The Section of Taxation anticipates proposing a new policy based on principles and guidelines that will enable the Section to provide the maximum amount of expertise to federal policy makers through comments on the complete range of alternative systems.

The resolution to withdraw the current policy is an essential first step; it is proposed without prejudice to the substance of the current policy.

 

Respectfully Submitted,

Stefan F. Tucker

Chair

February, 1999

 

1. Summary of the recommendation.

To withdraw the current policy on a value added tax that supports a credit method.

 

2. Summary of the issue which the recommendation addresses.

The current policy makes a recommendation with respect to one specific format for an alternative tax system that is considered a "consumption tax" -- namely the credit method value-added tax or VAT -- and expresses a preference for that format over the subtraction method.

 

3. How proposed policy position will address the issue.

By removing a policy that explicitly mentions only two specific formats for alternative systems, the resolution eliminates a possible interpretation that comments can be offered on only these two formats.

 

4. Summary of any minority views or opposition which have been identified.

None.

 

 

 

 

 

Submitting entity: Section of Taxation

Submitted by: Stefan F. Tucker, Chair, Section of Taxation

 

1. Summary of Recommendation

Withdraw the resolution adopted in February 1986 concerning a value added tax

that supports a credit method.

 

2. Approval by Submitting Entity

Submitted contingent on Section of Taxation approval at its January 15-16, 1999 Midyear

Meeting.

 

3. Has this or a similar recommendation been submitted to the House or Board previously?

This is a withdrawal of current policy.

 

4. What existing Association policies are relevant to this recommendation and how would they be affected by its adoption?

Current policy would be withdrawn by these resolutions.

 

5. What urgency exists which requires action at this meeting of the House?

U.S. Congress is considering alternative tax systems and the Section of Taxation

is concerned that this policy might limit our ability to speak effectively on the issue.

 

6. Status of Legislation

There is a very good probability that legislation might be introduced in the 106th

Congress.

 

7. Cost to the Association

None

 

8. Disclosure of Interest

No member of the originating Committee or the Council of the Section of Taxation

is known to have a material interest in the Resolution by virtue of specific employ-

ment or engagement to obtain the results of the Resolution.

 

9. Referrals

All Sections and Divisions

 

10. Contact Persons

James P. Holden

Steptoe & Johnson LLP

1330 Connecticut Avenue, NW

Washington, DC 20036

202/429-6407

Jere D. McGaffey

Foley & Lardner

777 East Wisconsin Avenue, Suite 3600

Milwaukee, WI 53202

414/297-5729

Christine A. Brunswick

Director, Section of Taxation

American Bar Association

740 15th Street, NW

Washington, DC 20005

202/662-8675

 

 

 

 

 

 

 

 

11. Contact persons (who will present the report to the House)

James P. Holden

Steptoe & Johnson LLP

1330 Connecticut Avenue, NW

Washington, DC 20036

202/429-6407

Jere D. McGaffey

Foley & Lardner

777 East Wisconsin Avenue, Suite 3600

Milwaukee, WI 53202

414/297-5729

 

12. Contact person regarding amendments to this recommendation

James P. Holden

Steptoe & Johnson Llp

1330 Connecticut Avenue, NW

Washington, DC 20036

202/429-6407

Jere D. McGaffey

Foley & Lardner

777 East Wisconsin Avenue, Suite 3600

Milwaukee, WI 53202

414/297-5729

MENU | WELCOME | NEW | MEETINGS | GROUPS | PUBS | LINKS

For additional information on the Section, please contact us at tax@abanet.org,or:
ABA Section of Taxation 10th Floor740 15th Street, NW Washington, DC 20005-1009
Phone: 202-662-8670 Fax: 202-662-8682