Hey, guys, we in corporate America sign contracts with various parties all the time, including our customers. How many long term supply contracts allow sudden price changes if the U.S. changes its tax system fundamentally by incorporating consumption tax concepts in a bastardized way? While there are often "savings" clause in contracts to address the unknown, this kind of provision is so far fetched that it is likely to be missing from many contracts. Then what?
This reminds me of the dilemma discovered in many contracts when the unthinkable occurred and negative interest rates happened in Europe. How many leases provided that rent escalation would go backwards if interest rates went negative? I know that some mortgages in Denmark required banks to pay their borrowers interest on a monthly basis under their mortgage loans. Yes, borrowers made principal payments to their banks and the banks in return made interest payments to the borrowers. Perhaps they still do. Oops.
Do the tax planners have a responsibility to understand these consequences and protect against them, or can they just rely on the pablum of macro economists who murmur that a higher dollar will make everything okay? I think if you have a long term deal with a customer, and there is no mention of this tax concept, you may have litigation on your hands, or worse. This is about contractual allocation of risk among supplier and customer. I guess you should have thought ahead. Should we call the day of reckoning National Bankruptcy Day?
I'm probably just a worrywart.