Every Modern Country in the World Has Border Adjustability Except America

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Posted by Alexander Hendrie on Thursday, February 2nd, 2017, 4:00 PM PERMALINK

America’s archaic, overly complex tax code makes it difficult – if not impossible – for U.S. businesses to compete with foreign competitors. We need revenue neutral, pro-growth tax reform to address this problem and reverse the trends of insufficient growth, too few jobs, and stagnant wages.

One reason for the American competitiveness problem is that the US is the only modern country without a border adjustment mechanism. Countries “border adjust” by applying equal, offsetting taxes on imports and tax breaks on exports. This allows countries to tax based on where the product is consumed, but the lack of a US border adjustment system results in a significant competitive disadvantage for American businesses.

Normally, when a product leaves one country, the border adjustment mechanism adjusts rates downward which is then offset when it enters the new country which border adjusts rates upwards. Neither country is imposing a tariff here. Rather they are taxing based on where the product is consumed.

Because the US does not have a border adjustment, American businesses that export overseas face a penalty relative to transactions between two countries with border adjustable systems – there is no border adjustment downward when the product is exported to offset the upward border adjustment when the product is imported.  Similarly, foreign businesses importing into the U.S. receive a tax break compared to transactions between two other developed nations, because they do not have a border adjustment up when sending products into the U.S.

This problem is not limited to a few of America's trading partners. The U.S. is the only nation without border adjustment among the 35-member Organisation for Economic Co-operation and Development (OECD) and the five country BRICS (Brazil, Russia, India, China and South Africa). The U.S. system is so antiquated that the only countries without a border adjustment are nations like North Korea, South Sudan, Iraq, Myanmar, and Western Sahara. 

[See the Full Map of Countries with and Without Border Adjustment Here]

While the border adjustment in the House GOP “Better Way” blueprint may sound like a tariff or a Value-Added tax, in reality it is neither. It is part of a modern, internationally competitive cash-flow business tax that replaces the cumbersome corporate income tax used today.

If lawmakers want American businesses to be able to compete, they must fix this outdated, uncompetitive system. They can do this by passing tax reform along the lines of the House blueprint.

OECD/BRICS Countries with Border Adjustment

OECD/BRICS Countries without Border Adjustment

  • Australia
  • Austria
  • Belgium
  • Brazil
  • Canada
  • Chile
  • China
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Iceland
  • India 
  • Ireland
  • Israel
  • Italy
  • Japan
  • South Korea
  • Latvia
  • Luxembourg
  • Mexico
  • Netherlands
  • New Zealand
  • Norway
  • Poland
  • Portugal
  • Russia
  • South Africa
  • Slovakia
  • Slovenia
  • Spain
  • Sweden
  • Switzerland
  • Turkey
  • United Kingdom



  • United States





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