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Retailers Look for Radical US Tax Reform

10 April 2013   (0 Comments)
Posted by: Author: Leroy Baker
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Source: Leroy Baker

In a letter sent to the Tax Reform Working Group on Income and Tax Distribution set up by the House of Representatives Ways and Means Committee, the Retail Industry Leaders Association (RILA) urged businesses to put all corporate tax preferences on the table in order to reduce United States tax rates substantially.

"Consistent with the tax reform vision put forth by (the Committtee's Chairman) Dave Camp (R – Michigan), RILA believes that all corporate tax preferences need to be put on the table in order to give the Committee as much latitude as possible to reduce the corporate rate in a revenue-neutral fashion," wrote Bill Hughes, the Association's senior vice president of government affairs, in his letter. "RILA also strongly supports the Chairman’s goal of reducing the corporate tax rate to 25%."

The letter cited a RILA-commissioned PricewaterhouseCoopers study last year that found the retail industry to be the second largest private-sector employer in the US, but also that the sector incurs an effective tax rate of 36.4%, fourth highest among the18 major industries and more than 10% higher than the average for all other industries.

"Obviously," it was said, "some industries are doing significantly better than other industries in our current corporate code."

In his letter, Hughes also covered the other tax distributional matter on the business tax side relating to the tax treatment of C-corporations relative to small businesses organized as pass-through entities and taxed at the individual level.

He pointed out that "In the past 25 years, there has been a tremendous growth in the number of businesses operating as pass-through entities (for example, sole proprietorships, partnerships, limited liability companies and S corporations). … As things now stand, the highest corporate rate is 35% and the highest pass-through rate is 39.6%."

However, he continued, "those numbers do not tell the entire story. On the corporate side you have the double taxation of dividends and capital gains, and on the individual side you have the Medicare surtax and the phase out of itemized deductions which make the cost associated with each of these types of business organization higher than the base ordinary income tax rate might initially indicate. At the end of the day, if the corporate rate is reduced, the pass-through rate should ideally be reduced as well."

"Comprehensive tax reform that eliminates preferences, substantially lowers rates and simplifies the tax code," RILA added, "will put more money in consumers' pockets, allow small businesses to grow and free US retailers to compete globally, invest, expand their businesses, and most importantly, create new jobs."

"RILA supports comprehensive, base-broadening, rate-reducing, revenue-neutral tax reform," Hughes concluded. "From our perspective, the ideal tax reform will provide for a substantial reduction in the tax rate for corporations and a substantial reduction in the tax rate for individuals and pass-through entities."


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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