The border tax is among changes proposed by the Republican-controlled House of Representatives

The border tax is among changes proposed by the Republican-controlled House of Representatives

Top executives from 16 major US manufacturers have sent an open letter to Congress urging elected officials to pass tax reforms and the controversial border tax in order to boost growth for domestic companies and taxpayers.

The letter, from a group of companies including Caterpillar, Dow Chemical Co., and Oracle Group, that founded the American Made Coalition (AMC) earlier this month, endorses tax reforms proposed by President Donald Trump. It is in opposition to efforts by the Americans for Affordable Products group, which includes companies such as Gap Inc and Target Corp, lobbying against the proposed US tax on imports.

The border tax is among changes proposed by the Republican-controlled House of Representatives. It would cut corporate income tax to 20% from 35% and assess the taxable income for US companies based on imports, including raw materials and components used in manufacturing, but would exempt exports from the calculation.

With up to 98% of all clothing sold in the US imported, it has massive implications for US retailers and their vast international supply chains.

However, in its letter date 21 February, the AMC recommends "enacting comprehensive pro-growth tax reform to remove a major impediment to economic growth — our outdated tax code".

"We have the highest business tax rate in the developed world and are one of the few countries that taxes business income on a worldwide basis," the letter states.

They say the changes would encourage businesses to invest in the US and help protect jobs from "unfair foreign competition".

The AMC describes the proposed border adjustment tax (BAT) as a "critical element" of House Speaker Paul Ryan's plan, and said it "ensures goods and services produced abroad face the same tax burden as those produced in the United States".

The letter cites a report from the non-partisan Tax Foundation, which estimates that 1.7m new jobs and higher wages could be created by implementing the House tax plan. It could also raise more than US$1trn over a decade to offset the costs of lowering the corporate income tax rate, according to the Foundation.

"We applaud your efforts to pursue tax reform that is both big and bold," the letter states. "Incremental tweaks will not level the playing field for American workers or dramatically reinvigorate economic growth. If we miss this chance to fundamentally reshape the tax code, it might take another 30 years before we have another chance to try."

A group of retail CEOs met with Trump and congressional leaders last week to argue against the border adjustment tax.

However, the President told the chief executives of eight of America's largest retailers – including Gap Inc and Target Corp – that tax reform "is one of the best opportunities" to boost the nation's economy.

Trump's tax proposal is expected to be released in the coming weeks.

US retail CEOs talk to Trump about tax reform

Executives representing the US apparel and footwear sector told just-style recently that, if adopted, the tax proposal would add to the upward pressure on prices.

US apparel sector braces for potential cost hikes