India better positioned against proposed US tax laws: Report

Significant uncertainty surrounds the possible US shift to a new border adjustment tax, but India and Indonesia are better positioned as compared to other Asian economies, says a report.

Under the current proposals for the US border adjustment tax, exports will be exempted from the calculation of US corporate taxable incomes, while imports will be taxed.

"In a scenario of no or limited USD adjustment, US import prices could rise as much as 25 percent, resulting in Asia exports declining 3-4 percent in aggregate, and shaving around 0.5 percent from the region's GDP," Credit Suisse said in a research note.

According to global financial services major Credit Suisse, Asian economies like Vietnam, Taiwan, Korea and Malaysia look most vulnerable to a possible US move to border adjustment tax as these countries export product mix that have higher price elasticity, meaning demand is more sensitive to changes in import prices.

The hit to GDP of these most exposed four economies would be around 0.5-0.9 percent due to a likely decline in exports to the US, the report noted.

"India and Indonesia, on the other hand, are better positioned, partly because their export products are less price elastic," the report adding that these two economies are "less exposed to border tax adjustments in the US due to their lower share of exports to the US as a share of GDP".

The report jotted down some of the other potential risks to Asian economies that could come from the US border adjustment tax like -- rapid USD appreciation, other economies (like China) would also respond with its own version of border adjustment tax or other similar policies among others, it added.