The hot new term in the world of tax reform is “border adjustability,” which refers to when governments have systems that tax imports and exempt exports.

This approach is widely associated with European-style credit-invoice, value-added taxes (VATs), and Republicans appear poised to bring something similar to our shores.

As part of their “Better Way” tax plan, House Republicans are proposing to change the corporate income tax into a destination-based, cash-flow tax (DBCFT), which in itself is a kind of border-adjustable tax.

A destination-based tax is levied based on where a good winds up, rather than its origin. Under a corporate border-adjustment tax (BAT), revenues made overseas by domestic companies would not be added to taxable income.

Conversely, companies that import goods for U.S. sale would not be able to deduct the cost of those goods against the corporate tax.

Not everyone is happy with this development. With border adjustability, consumers have to pay their home-country tax rate regardless of where they buy products. This also means that tax competition is weakened, giving politicians more leeway to boost tax burdens and increase the size and scope of government.

President-elect Donald Trump, meanwhile, has complained that a BAT is “too complicated.”

Is that a legitimate argument? Yes and no. In theory, any type of BAT can be very simple, with the New Zealand VAT being an example of a clean tax.

But, it’s also possible for such taxes to be very complicated. Many of the European VATs are riddled with special rates and preferences. In fact, there are a number of potential complications for the DBCFT now proposed in the United States.

Is it WTO compliant?

House Republicans gravitated to border adjustability because it is a way of raising substantial revenue (more than $1 trillion over 10 years) that can be used to finance pro-growth tax cuts.

But, GOPers didn’t want to choose a credit-invoice VAT because it is unpopular with libertarians, conservatives, and other advocates of limited government. So that’s why they came up with the DBCFT.

Under existing trade treaties, however, only “indirect” taxes (such as the aforementioned VAT) are eligible for border adjustability. And the DBCFT, even though it is designed to have a “consumption base” like a VAT, is a direct tax.

So if that system ever gets adopted, the U.S. will get dragged before the World Trade Administration and likely lose.

This doesn’t mean the DBCFT is “too complicated,” as Trump might say, but it does mean that there would be a huge amount of uncertainty if it gets close to passage.

Even more worrisome, lawmakers might respond to an adverse WTO decision by making wages non-deductible, which would turn the DBCFT into a subtraction-method value-added tax.

This nightmare scenario causes considerable angst for people who worry about giving politicians a money machine to finance bigger government.

Will it be susceptible to “carousel fraud”?

Nations with border-adjustable value-added taxes have a significant problem with fraud. Businesses have a big incentive to claim domestic sales as foreign sales because they then get VAT rebates.

There’s also a problem on the other end as fly-by-night purchasers collect VAT on imports and then disappear before that money gets forwarded to government. This issue of “carousel fraud” is a big problem in Europe.

The DBCFT isn’t exactly a VAT, but it could create similar problems. Businesses will have an incentive to classify sales as exports in order to avoid tax. Just like in Europe, that means lots or rules and regulations as the government tries to prevent leakage.

Whether all that red tape means the system will be “too complicated” is a judgment call.

How will cross-border activity be impacted by the promised changes in the value of the dollar?

Supporters of the DBCFT say their tax on imports and exemption for exports isn’t anti-trade because the dollar will rise in value. That’s a reasonable proposition, but it overlooks the fact that exchange rates are affected by all sorts of factors.

Thus, investors, entrepreneurs, and companies will have to devote considerable time to figuring out the potential impact.

Moreover, there will be windfall gains and losses for entities that earn income in one currency and pay lenders in another currency. This will be an especially important (and threatening) issue for foreign companies (and also governments) who borrow in dollars and earn local currency.

If the dollar suddenly jumps in value, that might wreak havoc and cause defaults or bankruptcies. This will complicate economic life, though it may not be the “too complicated” that Trump has in mind.

What about rules for “export” of real estate and education?

Foreigners each year spend billions of dollars purchasing things that never leave the United States, most notably real estate and college education. These sales are “exports” in the sense that money comes into America from overseas and is used to buy things.

How will these transactions be taxed? Presumably, there wouldn’t be any border adjustability since nothing leaves the country, but that’s a wrinkle that will have to be addressed.

To conclude, it’s not clear that a DBCFT is complicated (particularly compared to the current corporate income tax). That being said, I don’t think voters elected Republicans to push a tax that undermines tax competition and could pave the way for a VAT.

So I’m heartened by Trump’s words, even if I’m surprised that he’s discouraging them from a bad idea rather than vice-versa.

Daniel J. Mitchell is a senior fellow at the Cato Institute.