UPDATE 1-U.S. Republican leaders announce end of border tax proposal

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WASHINGTON, July 27 (Reuters) - A Republican proposal in the House of Representatives to institute a border tax on imported items has been killed, party leaders said on Thursday, saying they did so as part of a tax overhaul deal struck between congressional and administration negotiators.

The border adjustment tax was meant to discourage U.S. companies from manufacturing products overseas and then importing them back into the United States for sale.

The decision is a victory for large retailers and other importers who lobbied aggressively against the proposal, including a coalition that included automakers like Toyota and stores like Target, Autozone and Best Buy.

"While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform," the "Big Six" Republican tax negotiators said in a joint statement.

The Big Six is comprised of Treasury Secretary Steve Mnuchin and Gary Cohn, the head of the National Economic Council - both representing President Donald Trump - House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell and the heads of the two tax-writing committees in Congress, Senator Orrin Hatch and Representative Kevin Brady.

The group did not indicate whether it had reached a deal on a corporate tax rate, saying only that it wanted to see that rate as low as possible.

Trump has vowed to finish a tax overhaul by the end of this year.

The defeat of the border adjustment tax is a blow to a policy that Ryan had worked to gain support for more than a year.

Republicans are keen on reforming the tax code. Party leaders in Congress are hopeful that the current debate on repealing and replacing Obamacare, which is now before the Senate, can be completed quickly, allowing Congress to then turn its attention to the tax code. (Reporting by Ginger Gibson; Additional reporting by David Morgan and David Lawder; Editing by Leslie Adler)