Week in Insights: The ‘Chicken Tax’ Has Made an Enduring Impact

Curated by Daniel Xu

This month marks the 60th anniversary of the so-called “chicken tax,” an obscure bit of tax and trade policy that primarily impacts light trucks.

The tax and its name originated from the Chicken War, a period from 1961 to 1964 during which the European Economic Community denied market access to US chicken producers to protect domestic poultry farmers.

The US introduced the tax after negotiations to resolve the rooster ruckus reached a stalemate. The Lyndon B. Johnson administration imposed a 25% tariff on light trucks—specifically to capture the Volkswagen Microbus—as well as other exportable goods where the offending EU states would feel the pinch.

The taxes on most of the goods fell away, but the tariff on light trucks has remained—long after the underlying fowl fracas has been forgotten.

The dominance of American light trucks is at least partially due to this clucker conflict and the resulting tax. The tax has also led to unintended consequences, such as inspiring “tariff engineering” procedures by manufacturers disassembling, importing, and assembling vehicles to avoid the tax.

The chicken tax is a memorable example of how trade policies can have long-lasting and unforeseen impacts on global trade and manufacturing strategies across diverse industries.

At Bloomberg Tax, our expertise extends beyond conventional tax policy analysis. We’re committed to exploring all things tax, including its more unexpected aspects, such as the nuances of poultry-influenced tariffs.

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—Andrew Leahey

Look for Leahey’s column on Bloomberg Tax, and follow him on Mastodon at @andrew@esq.social

Rescued chickens gather in an aviary at Farm Sanctuary’s Southern California Sanctuary, in Acton, Calif., on Oct. 5, 2022.

Photographer: Mario Tama/Getty Images

State Insights

Oregon’s new tax compliance certificate for cannabis businesses adds a challenge to an industry facing decreased demand and substantial competition with illegal operations, say AB FinWright’s Rachel Wright, Abraham Finberg, and Simon Menkes.

Federal Insights

Former IRS Commissioner Charles Rettig says the IRS’s plan to tax cryptocurrency and other digital assets would overwhelm agency staff by collecting a staggering amount of consumer data.

Avalara’s Scott Peterson explains how the IRS’s decision to delay implementing a law lowering the amount that triggers a 1099-K form isn’t delaying marketplace sellers and gig workers from feeling the impact of the changes.

Russell Ryan, a former SEC enforcement attorney who is senior litigation counsel at the New Civil Liberties Alliance, calls for the SEC to seek accountability from the Public Company Accounting Oversight Board.

Global Insights

Canada’s introduction of a bill that would enact a 3% digital services tax continues a puzzling conflict with the US and doesn’t override its previous mixed signals on the tax, say Davies’ Nathan Boidman, Michael Kandev, and Ian Caines.

Meta’s Rafael Benevides says Brazil’s move to simplify its tax system is expected to produce more accurate depictions of companies’ financial health without use of historical tax distortions.

Columnist Corner

The US Supreme Court case Moore v. United States shows that a wealth tax likely wouldn’t survive legal scrutiny, Andrew Leahey says in his Technically Speaking column. He argues that estate tax reforms such as lowering the exemption threshold, adjusting rates progressively, and eliminating the stepped-up basis would be a more practical alternative to addressing wealth inequality.

Career Moves

Jenny Hill Bratt and Matthew Owens have joined Sheppard Mullin as partners in San Diego.

Ilyana Ezhaghi has joined PKF O’Connor Davies as a partner with the tax practice in New York.

Susan Keeler has joined Venable as counsel in the transactional tax group based in the San Francisco office.

Scott Moresco has been named managing director within the tax practice of Alvarez & Marsal.

Matt Mentzer has joined Foulston Siefkin as part of the Overland Park, Kan., office.

If you’re changing jobs or being promoted, email your submission to TaxMoves@bloombergindustry.com for consideration.

News Roundup

It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team (login required).

• Five European Union countries will delay implementing the global minimum tax because of the small number of in-scope companies headquartered in their territories, a notice published in the EU Official Journal said.
• Columbia University and New York University could lose longtime New York City property tax exemptions under proposed legislation that supporters say could send hundreds of millions of dollars annually to the City University of New York.
• A multilateral tax treaty text that’s part of the OECD-led international tax deal doesn’t meet its goals to provide more stability and certainty in the international tax system, the US Chamber of Commerce told the Department of Treasury.
• US accounting standard-setters published long-awaited rules requiring companies to shed light on one of the most opaque areas of their financial reports: their tax obligations.

The New York University John A. Paulson Center under construction in New York, on Dec. 13, 2022.

Photographer: Amir Hamja/Bloomberg via Getty Images

Tax Journals

(Bloomberg Tax login required)

Tax Management International Journal

MNEs should examine the transfer pricing implications of the Pillar Two minimum tax and think again about the potential benefits of advance pricing agreements, say Alistair Pepper, Quyen Huynh, and Samira Varanasi of KPMG.

Our Team

We talk about tax a lot. But you would hear much more if you popped into one of our Teams meetings. Here’s a quick look at what some of us are watching, reading, and listening to this week.

Watching
Rebecca Baker (Editor-at-Large): “Unstable,” an offbeat sitcom starring real-life father and son Rob Lowe and John Owen Lowe. Touching and laugh-out-loud funny.

Reading
Melanie Cohen (Content Editor): Armando Lucas Correa’s “The German Girl,” a multigenerational story that originates during World War II.

Listening
Daniel Xu (Content Editor): Iron Maiden’s album “Somewhere in Time.” I hadn’t gotten around to this one until now despite knowing most of their ‘80s music, but it’s exactly what I expected—classic heavy metal.

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