HOUSE GOP WON'T OK INVENTORY TAX CHANGE

Byline: Joyce Barrett

WASHINGTON--An inventory tax change proposed by the Clinton administration to help pay for the GATT Uruguay Round must be abandoned if House Republicans are to endorse the agreement, the ranking Republican on the House Ways and Means Committee said Friday.
Rep. Bill Archer (R., Texas) said the proposed tax change, which is being actively opposed by retailers, has emerged as a "major problem" with panel Republicans. Archer said he discussed the objections to the inventory tax change with White House chief of staff Leon Panetta on Friday morning.
As a result of the Republicans' request, Clinton administration officials canceled a planned Friday morning meeting with members of the House panel until it could come up with alternative funding.
The proposal is part of an $11.5 billion funding package offered by the administration to make up for the tariff revenue that would be lost during the first five years of liberalized trade under GATT.
Of the estimated $1.2 billion that would be raised by the inventory change, some $550 million would directly affect retailing by repealing the lower-of-cost-or-market tax deduction. Under the change, retailers that sell items for less than they paid for them could not take a tax deduction for the loss until after the item is sold. Under current tax law, retailers can take the deduction before they sell the item in anticipation of the expected loss.
The National Retail Federation has come out strongly against the proposal and hand-delivered letters Friday to Daniel P. Moynihan (D., N.Y.), chairman of the Senate Finance Committee, and Sam Gibbons (D., Fla.), acting chairman of the House Ways and Means Committee, asking that the inventory tax proposal not be included in any GATT funding package.
"Retailers find it hard to explain why our industry and, indirectly, our consumers should pay for eliminating outdated quotas and reducing other tariffs and protectionist schemes that in total have added $700 a year to the clothing bill of a family of four," NRF president Tracy Mullin wrote. "We believe that we've already paid one--for decades--to underwrite these schemes and that we should not have to pay again for their long overdue repeal....
"We have serious concerns about this proposal and urge you to drop this provision."
Discussions on the inventory tax are part of informal negotiations under way among members of the House Ways and Means Committee as they try to come to agreement on funding proposals and whether a fast-track extension, seen by the administration as a necessary element for negotiating future trade pacts, should be put in the GATT implementing legislation.
Archer, as well as Gibbons, told reporters Friday the panel was trying to reach some agreement before it began meeting with members of the Senate Finance Committee to reconcile the two implementing bills. Meetings with the Senate panel could come this week.
Gibbons said the committee members have not yet discussed a controversial rule of origin change for apparel that is in the House bill but was struck from the Senate plan. House Majority Leader Richard Gephardt (D., Mo.), however, a strong defender of organized labor, is pressuring members of the panel to insure that the rule change is included in the final implementing bill sent to the White House.
The change, pushed by the U.S. textile and apparel industries, would shift the country of origin for apparel imports from where the fabric is cut to where the garment is assembled. It has met with strenuous objections from retailers and importers, who say it would significantly raise costs of apparel imports. The change is aimed in particular at the custom of assembling apparel in China from fabric cut in Hong Kong and shipped under Hong Kong's much larger quota.
Tom Hayes, deputy chairman of The May Department Stores Co., based in St. Louis, Mo., has been active in lobbying against the rule change and has written Gephardt opposing it.
As for extension of fast track negotiating authority, the Senate panel struck it from its version, as reported. The House committee did not debate it but did keep the administration's language in its version of the implementing bill. In an effort to appease critics, the administration has scaled back its original request for a seven-year extension to a 2 1/2 year extension. Gibbons said the administration still wanted to see a fast track extension included in the GATT implementing legislation but would not jeopardize the entire pact to secure it.
--Fairchild News Service

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