In early 2017, some key members of the U.S. Congress were seriously considering a major revision of the U.S. corporate income tax code, instituting a tax based on where products are consumed—not where profits are earned. It is an idea developed by Alan J. Auerback of the University of California, Berkeley. A set tax rate would be imposed on the sales revenue of a product less than the cost of materials used (and possibly a deduction for U.S.-only labor costs), with few or none of the deductions currently available in the tax code. The plan is said to be "destination-based" and "border adjusted" because revenue from domestic sales is counted toward profits, but the revenue from export sales is not, and while the cost of domestic materials is a deductible cost, the cost of imported materials is not. Thus, there is no tax on U.S. products destined for export. On the other hand, a U.S. manufacturer would receive no tax deduction for the cost of imported materials used in manufacturing. Similarly, a U.S. retailer would pay tax on the full amount of its domestic sales of imported products, without any deduction for the cost of the imported materials. The likely result is a lower price for U.S. exports, and higher prices paid by American consumers for imported products. Large U.S. exporters support the plan and American retailers and consumer groups do not. The arguments of economists are far-ranging. a. Do you think the tax plan is permissible under GATT Article III? Why or why not? b. The WTO Agreement on Subsidies and Countervailing Measures prohibits, "The exemption, remission or deferral specifically related to exports, of direct taxes. . . ." It defines "direct taxes" as ". . . taxes on wages, profits, interests, rents, royalties, and all other forms of income 7 Do you think this tax plan might be a prohibited subsidy? Why or why not?