Taxes And Fakes Top Legislative Concerns

This election year will be one of flux for legislative and other government proposals that would affect retailers. Some appear headed for compromise while others may be ditched altogether as legislators shift into campaign mode and as they and President Clinton bicker over just about everything.

While businesspeople and consumers watch the daily dramas played out in Washington, D.C., they’ll concentrate on several core issues:

  • If taxes are lowered, consumers will have more disposable income.

  • If Medicare payments and taxes are increased or coverage decreased, discretionary spending will rise or fall accordingly.

  • If government cost-cutting continues, layoffs in the military and at federal offices will squeeze the economies of certain regions.

In addition to these general issues, here’s a look at several that could affect the jewelry industry specifically.

JA agenda: In November, the government sought comment on a proposal to add a 100% tariff (equal to the cost of the item) on gold merchandise imported from countries in the new European Union. The U.S. and the E.U. developed a tariff schedule identical for all countries when the E.U. came into being in 1995. Now, however, the U.S. says the tariff is too low and has issued the new proposal in an effort to force renegotiation of the tariffs (see related story in the Upfront section of this issue). JA Executive Director Matthew Runci explains in a letter to the government that the proposal looms as a back-breaker for many U.S. retailers and manufacturers.

In addition to this issue, Runci and JA Legislative Counsel Tim Haake have prepared a complete draft agenda for legislative action this year. The draft includes these issues:

  • Alternative taxes. Numerous proposals are floating around the nation’s capital to change the tax structure with such measures as flat taxes or consumption taxes. Runci says most retail and manufacturing jewelers join with other businesses in opposing complete tax overhauls. While the proposals have stirred interest, there’s not much support, he says.

  • Immigration. U.S. jewelers have trouble attracting European craftspeople who were trained under apprenticeships because immigration law generally doesn’t recognize this type of education under its “professional training” regulations. JA is working with legislators to amend the law.

  • Restrictions at military PXs. Last year, JA helped to scuttle a proposal by some vendors to ease restrictions on the amount of merchandise allowed in military PX showcases. PXs (stores that sell government-subsidized merchandise on military bases) can pose a real competitive threat to nearby retailers. JA will watch to make sure the restrictions continue this year.

  • Depreciation. Terms such as “depreciation of fixed assets” may excite accountants more than retailers. But it’s useful to know that efforts are underway to allow retailers who lease facilities to take tax breaks (in the form of depreciation allowances) over 10 years instead of the current 39 years. “Retailers would recognize the tax benefits more rapidly,” says Runci. This could generate greater interest in renovation and remodeling. “We would also like to see the legislation modified to include property owned by retailers.”

  • Advertising deduction. Legislators are discussing changes to a deduction allowing certain retail advertising as a business expense. Opponents see it as corporate welfare.

Also this year, JA will work with the U.S. Postal Service to create an overnight registered mail service for items worth more than $500, push to reinstitute the use of prescreening polygraph tests and work with states to enhance their truth-in-pricing laws.

Watching watches: American Watch Association officials continue to arm their anticounterfeiting arsenal. Legislation that AWA drafted in 1994 has grown into a far-reaching bill called the Anticounterfeiting Consumer Protection Act of 1995 (S-1136). At press time, the Senate was nearing a vote on the bill and the House was expected to begin debate on its version. “Unless a coalition of counterfeiters suddenly appears, we expect the final bill to pass early in 1996,” says AWA Executive Director Toby Collado. The bill would give authorities power to investigate, prosecute and punish counterfeiters.

As support for the legislation has grown, many industries have joined with the watch industry to form the International Anticounterfeiting Coalition.

As an active member of the Coalition to Preserve the Integrity of American Trademarks, Collado also is pursuing measures to fight gray market watches, which are made for foreign markets, then imported here for sale by unauthorized agents. He says the manufacturer should be notified quickly when the U.S. Customs Service seizes products whose identification codes have been altered or erased to facilitate gray market sales. Currently, the manufacturer is rarely notified in a timely manner – if at all. This would give the manufacturer time to take possession and destroy the items before they are reexported.

“We are also trying to make it more difficult and illegal to reimport items that have been decoded,” he says.

HIGHLIGHTS

  1. General issues to watch include tax and Medicare reform and government cutbacks.

  2. Specific issues for jewelers to watch include the possibility of a consumption tax, changes to immigration law and other changes in laws affecting businesspeople.

  3. The watch industry will continue to push for anticounterfeiting measures.