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The European VAT Is Not a Discriminatory Tax Against US Exports

179 points by dzogchen 2y ago

deleted 2y ago
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surfmike 2y ago
Well, because we don’t have a VAT, it is, isn’t it? The article puts the blame on the US sales tax system. But regardless, US exporters to the EU end up paying more taxes than domestic EU producers. > Europe’s VATs are not tariffs and are not subsidizing European exports. Instead, US states’ poorly-designed sales taxes are harming their own businesses’ competitiveness—whether they’re selling down the street, across state lines, or around the world.
- misinfo2024 2y ago
  [dead]
- jakewins 2y ago
  Sorry I don’t follow - how does VAT make US exporters pay more than domestic EU manufacturers? They are both subject to the same VAT, or?
  - surfmike 2y ago
    Because they are not able to deduct US state sales taxes on business inputs from the final VAT. While Europeans can deduct their local (VAT) taxes on business inputs.
    - jakewins 2y ago
      I still don’t follow. If the VAT was completely removed, US businesses would still pay state sales taxes on inputs and EU manufacturers would not? The two things seem unrelated?
  - aredox 2y ago
    It doesn't. It has never been. Trump is a liar and a crook and is bullshitting you.
- NewJazz 2y ago
  For a VAT to work they have to levy the tax at each stage. Import is a stage... But regardless, US exporters to the EU end up paying more taxes than domestic EU producers. No, because the domestic EU producers are paying VAT at each stage of their production process. The US manufacturers need to catch up!
  - kvemkon 2y ago
    > the domestic EU producers are paying VAT at each stage of their production process. As long as I know, VAT should be payed only once for a finished product when sold to the very end customer.
    - Muromec 2y ago
      No. The vat is payed by the seller on full price of what they sell. So does their supplier. The trick is -- yoy get tax credits when your supplier is a vat payer. As a result, the tax is collected in parts over the final price sold to the non-business customer. Which is why being a registered one man company with a vat number allows you to get back vat for your laptop
  - surfmike 2y ago
    We pay sales tax on business inputs as well. But unlike European producers, that tax is not deductible from from the final VAT.
    - NewJazz 2y ago
      Sounds like we need our own VAT.
- akoncius 2y ago
  > But regardless, US exporters to the EU end up paying more taxes than domestic EU producers. but only because of tariffs, not VAT system. we pay VAT regardless from where the good came from.
- tdb7893 2y ago
  As an American I don't really deeply understand VAT but I don't get why an American car would pay more overall VAT than a domestically produced car. My impression is that VAT will be the same for items that cost the same, no matter where they are produced.
  - stuaxo 2y ago
    It will be the same, you were right.
  - Muromec 2y ago
    The idea behind vat is to spread the sales tax across the chain, which means the government gets the money even if the end product didnt reach the customer. Naturally the chain breaks at the border, so importers pay vat and exporters get vat refunds. In the end its just a sales tax
    - bardak 2y ago
      The main purpose of VAT is to not fully apply a consumption tax multiple times through manufacturing and distraction
      - surfmike 2y ago
        Exactly, and for American producers, sales tax does get applied multiple times and can’t be deducted from VAT
        alexanderchr 2y ago
        Not true, see for example https://comptroller.texas.gov/taxes/publications/94-124.php https://comptroller.texas.gov/taxes/publications/94-124.php
  - aredox 2y ago
    I don't get why you believe the liars who told you an American car would pay more overall VAT than a domestically produced car. I mean, you are getting lied to your face, by someone who is a serial liar, so why are you trying to find an explanation for something that doesn't exist?
- AndrewDucker 2y ago
  VAT applies equally to imported goods and locally produced goods.
- smooc 2y ago
  VAT is applied on every good sold. So no. If you are able to produce cheaper and shipped cheaper than your EU competitor it will be cheaper when a consumer buys it. The consumer pays the VAT, not the producer.
  - surfmike 2y ago
    Your European competitor will be able to deduct all their local VAT taxes on business inputs but you won’t be able to deduct your local sales taxes on your inputs.
- aredox 2y ago
  Are you dense? The VAT applies to all purchases and doesn't discriminate on where an item is produced. Have Americans become really that dumb?
  - devuo 2y ago
    I think it's more a case of intellectual dishonesty.
    - ceejayoz 2y ago
      https://www.urbandictionary.com/define.php?term=The%20Rule%20of%20Goats https://www.urbandictionary.com/define.php?term=The%20Rule%2...
      - watwut 2y ago
        Yeah and no. I would see intellectual dishonesty as worst and the fact that we did not called it that for years enabled these people. They were giving all possible benefits of the doubt. And calling them dumb is kind of benefit of the doubt.
  - School-Cotton 2y ago
    > Have Americans become really that dumb? It’s not a question of being dumb or not, but rather that VAT doesn’t exist in the US so most people don’t understand how it works, if they have even heard of it at all. Instead of VAT, most states have sales tax, which is similar in spirit but doesn’t work the same way.
    - coolgoose 2y ago
      I mean, I get it to some extent, but there's literally an article linked on this whole thread that we're all commenting, explaining why not...
    - nabla9 2y ago
      The linked article explains VAT. Being confidently wrong in the comment section is dumb and arrogant.
- przemub 2y ago
  Lol no.
- Tzk 2y ago
  You pay VAT on all products when they’re sold or imported. In Germany it’s 19% and called “Mehrwertsteuer” for the domestic products and “Einfuhrumsatzsteuer” for imported products. There’s an additional Import tax on some products.
- epolanski 2y ago
  No both pay the very same amount of taxes.
- wesselbindt 2y ago
  Whether or not some action is discriminatory is inherent to that action. Something I do can't be considered discriminatory because of what someone else does. So for example, if I shake hands with all people of all colors, you cannot call that discriminatory just because my neighbor doesn't shake hands with people. That would be completely nonsensical. Similarly, if the EU applies VAT to all goods sold, that can't be considered discriminatory just because some other country doesn't apply VAT.
- gamblor956 2y ago
  Non-European companies don't pay VAT or deal with VAT compliance unless they have sufficient business in Europe that they are required to register for local tax compliance. European customers handle the VAT themselves when dealing with non-VAT-registered non-European suppliers; this is known as the "reverse charge" mechanism and it's generally a feature of almost every VAT system in the world. (In a nutshell, the customer charges themselves VAT and pays it on their own VAT return. This is similar to the way "use tax" works in the U.S.)
- bigbacaloa 2y ago
  [dead]
vages 2y ago
I really liked the critique of the US sales tax. I did not know such taxes still existed.
cjs_ac 2y ago
> Note that, while a VAT is imposed at every stage of the process, the net effect is to apply the rate one time to the final sales price. The tax is collected in increments (on the “value added” at each stage), but unlike with a pyramiding sales tax, it does not double tax inputs. The VAT and ideal sales tax share an identical tax base and, if imposed at the same rates, yield identical collections. The VAT is important in Europe, because if a product is manufactured in many countries, each of those countries gets a share of the tax revenue.
- tobias3 2y ago
  B2B sales between European countries don't have a VAT.
  - deleted 2y ago
    [deleted]
  - procaryote 2y ago
    VAT on b2b sales even within an European country are usually not that important. You add VAT to things you sell (e.g. car repair services), you pay VAT on things you buy (e.g. car parts). If you collected more VAT on sales than you paid on purchases, you owe that to the tax department. It's a bit of book-keeping but doesn't affect your profits directly.
  - luckylion 2y ago
    They do, it's just that many choose the reverse charge mechanism, so the recipient of the services or goods is responsible for paying the VAT to his tax authority. It makes things easier, it doesn't remove VAT.
    - beejiu 2y ago
      For almost all B2B cross-border transactions between two VAT registered entities, the reverse charge is mandatory, not something that you can choose to opt in to.
devuo 2y ago
Comparing VAT to an Import Tax is unbelievably stupid.
- r0ckarong 2y ago
  That's what it says on the flag don't it?
  - marcosdumay 2y ago
    On a tangent, Trump decided to punish Brazil be setting the import tax on ethanol as whatever Brazil sets for importing US ethanol. Now that our government controls the domestic price of fuel in the US, it's too bad Lula doesn't seem to be in a trolish mood...
    - watwut 2y ago
      I do not understand what do you mean here?
      - tuukkah 2y ago
        If the president of Brazil, Lula, decides to increase import taxes, the US will mirror this decision. As a result, Lula has set a tax rate that US applies on imports and that US buyers end up paying to the US government.
        dmix 2y ago
        The US is still entirely in control of the rate.
        tuukkah 2y ago
        No, while you mirror, you are not in control. But sure, you can decide to stop the mirroring that you started even though now it puts you in a worse situation than where you started. Say, Lula sets the import tax at 100% - will Trump say "that's too high a number for me, I fold"? In that case, he wanted the rates to be the same but now the difference is even higher.
seydor 2y ago
Of course it's not. In fact the complexity of vat in europe is a disadvantage when dealing with things like small transactions. We have resorted to using an American company as a merchant of record to manage the complex invoicing for us, even if they keep a percentage of the sales.
- gamblor956 2y ago
  VAT is simple unless your company has a very large, broad set of products. It's a PITA to deal with due to the invoicing and documentation requirements, but that's due to the volume of work required, not the complexity of it.
  - kyrra 2y ago
    So it's simple but hard?
    - secondcoming 2y ago
      Simple but tedious
    - surfingdino 2y ago
      Expensive. Dealing with all EU tax authorities is expensive and that cost can be prohibitive for smaller businesses.
    - gamblor956 2y ago
      It's simple but it's a lot of busywork. This can be expensive for companies with a lot of purchases as the tax authorities demand a copy of every invoice regardless of the size of the transaction. Other than the volume of paperwork involved, the actual technical aspects of VAT are far simpler than sales tax, as most countries only have a handful of VAT rates.
  - milesrout 2y ago
    Yeah unfortunately EU countries have adopted complicated VAT systems in the sense that they have different rates on different categories of goods and services. New Zealand has a much more sensible system: other than a few categories of services that are zero-rated (like land) for GST (what NZ calls VAT) everything is charged at a flat rate of 15%. It eliminates all the bullshit like decade long court proceedings about whether something is a cake or a biscuit, or silly social media campaigns about whether tampons are "luxury goods". It is all taxed at 15%. That being said, the system is not more complex in the EU really, just more annoying.
coolgoose 2y ago
I find it funny that a lot of people can't read the article, so here's an ELI5 case on why VAT isn't discriminatory from our lovely Franch LeChat. Going to add TLDR for people: Vat applies to all shit on the market, regardless of where the fuck you produced it. --- The Value Added Tax (VAT) in Europe is designed to be a consumption tax that applies equally to both domestically produced goods and imports. This means that whether a product is made locally or imported from another country, the same VAT rate is applied when the product is sold to the end consumer. This approach is intended to create a level playing field, ensuring that local producers do not have an unfair advantage over importers, and vice versa. The reason VAT is not considered discriminatory against imports is that it is applied at the point of consumption rather than production. When goods are imported into the EU, they are subject to VAT at the same rate as similar goods produced within the EU. This ensures that the tax burden is the same for both local and imported products, promoting fair competition. Additionally, businesses can often reclaim the VAT they pay on purchases, including imports, which further neutralizes any potential disadvantage. However, it's important to note that while VAT itself is not discriminatory, other factors such as customs duties and regulatory standards can still affect the competitiveness of imports versus local produce. These factors are typically addressed through separate trade policies and agreements rather than through the VAT system.
- lazyeye 2y ago
  And if you read a previous comment it effectively means imported goods are taxed twice. Both in their country of manufacture and then again in the country where they are sold. It makes sense to tax local companies with a VAT tax to fund their local govt/infrastructure. But imports are get nothing for that tax. If you are a European exporter and there is no tariff/tax in your export destination then you only get taxed once. And thats why "where the fuck you produced it" matters.
  - rahkiin 2y ago
    But those taxes serve different purposes? On fuel we have VAT (for commerce) and also other taxes (for road maintenance). Get yourself a good transatlantic deal to get rid if import taxes (and stick to it)
deleted 2y ago
[deleted]
grg0 2y ago
Is Stephen Miller really that stupid, or does he have an agenda to gut American business? One really has to wonder if he's actually a spy from an adversarial nation.
- markhahn 2y ago
  motivated reasoning is the main problem.
- mullingitover 2y ago
  Everything with these people makes sense when you understand that they want to break down the United States into their own corrupt little fiefdoms. They are anti-Union, not just with workforces, but with nations, because united people are harder to exploit.
  - 9283409232 2y ago
    This is why the way to fight them is to get involved in your local communities. Get off social media and get involved locally. Talk to people, help people.
- ronbenton 2y ago
  By weakening its ties with Europe and other allies, the US is undoubtedly taking actions that benefit both Russia and China. That's not to say the president or his team are in cahoots with one or both of those countries, but these are the kinds of actions the US would be taking if that level of conspiracy were to be true.
- outside1234 2y ago
  You can't look at this as having logic. It is a mob shakedown of everyone, including you.
- 9283409232 2y ago
  There are a couple goals here. They would like to tank US economy so oligarchs can buy it for pennies on the dollar. Oligarchs like Elon and Thiel want to own their own cities called Network States. You can find more details about that here https://www.thenerdreich.com/ https://www.thenerdreich.com/ Trump is owned by Russia and China so turning America away from Europe weakens them. Like Zelenskyy says, Russia is likely going to attack NATO within the next couple years so breaking them away from America takes away a very powerful ally. Europe likes to twiddle their thumbs so he is betting that they won't get their shit together and odds are he is right. The EU moves slowly and is very nonsensical. The real play that not even Trump sees coming is putting JD Vance behind the desk. Elon and the rest of the billionaire class are just using Trump to set the table for Vance. Once that happens we are all truly fucked.
markhahn 2y ago
egads. stephen miller is another festering embarrassment to the country.
lucasyvas 2y ago
This is going to be used as the basis of the tariff. It doesn’t matter if the Trump administration is correct. Take it from a fentanyl-slinging Canadian - they’re either dumb or grasping for straws / full of shit. They are telling you tariffs are coming and they have identified the scapegoat to communicate to their voter base. That’s all you need to know. I’m honestly not sure why anyone is bothering discussing it since it’s a waste of time. If you are debating it, it means you are already behind the curve of understanding of where it’s going.
- jamesblonde 2y ago
  No idea why you're getting downvoted. The rules of the game have changed. The rational actors will have to adapt.
  - lucasyvas 2y ago
    Bots or people in complete denial. People are waking up a bit slower than expected to the reality of what is happening. I completely understand in a way, because it only becomes clear once the barrel is pointed at you. At that point, it’s too late. Trying to help out where I can - this is all misdirection. I’m sure there are a lot of smart people on here fascinated by pattern recognition. It’s their time to shine.
  - layer8 2y ago
    It’s being discussed so that people don’t believe this is actually rational.
    - lucasyvas 2y ago
      I appreciate your optimism but the people you hope to convince are no longer listening.
      - layer8 2y ago
        Some are, as evidenced in this very thread.
loxodrome 2y ago
[flagged]
- aredox 2y ago
  Yeah, yeah. Go to Somalia, Galt.
- secondcoming 2y ago
  The UK is also typically 20%. Basic items such as bread and feminine hygiene products are VAT free.
- Muromec 2y ago
  If 20% is confiscatory, try looking at how alimonies are calculated.
bikson 2y ago
Let's wait until they learn about public health care.
- fransje26 2y ago
  They are going to tax the EU for it, because unfair competition.
alexey-salmin 2y ago
> Despite the appearance of subsidizing exports and punishing imports, however, a border-adjusted VAT is trade neutral. A border adjusted tax leads to currency appreciation for the imposing country, which would make it cheaper to import goods, more expensive to export goods, and thus would cancel out the apparent benefits of the tax on imports and the rebate on exports. This isn't even remotely true
ReptileMan 2y ago
From the point of view of a US company VAT and Tarif are indistinguishable - they make exports 20% more expensive, so US company export less.
- aredox 2y ago
  It completely wrong as it applies to local goods too.
- tzs 2y ago
  Nope. The difference is that a tariff only applies to imports, whereas a VAT applies to all sales in the country regardless of whether they are imports or domestic. The former puts imports at a competitive disadvantage. The latter does not.
Taniwha 2y ago
If you're going to start equating VAT (essentially sales tax) with tariffs you open the whole nightmare can of worms that is US sales tax to the rest of the world - for those not living in the US every state, and in some cases every county has its own sales tax rate ....
- nxm 2y ago
  Sales tax is the same across all goods sold in the US, irrespective of whether they were imported or not. VAT rate differ based on the origin which is the issue
  - fiddlerwoaroof 2y ago
    This isn't true: local (to me) jurisdictions vary between an 8ish% sales tax and a 10% sales tax. In many states, there's no sales tax on food but food is taxed in Alabama. There's any number of variations of this in the US.
  - watwut 2y ago
    > VAT rate differ based on the origin which is the issue Which is a lie. They do not differ based on the origin and that is not the issue. The issue is that American top politicians are used and enabled to brazenly lie and their voters spread it happily.
  - falcor84 2y ago
    In what way does VAT differ based on the origin? All VAT is cancelled out except for the final purchase by a consumer, no?
  - alistairSH 2y ago
    WTF? No. Not even remotely true. Rates vary by state and locality. And vary across type of good being sold. You couldn’t be more wrong if you tried. https://taxfoundation.org/data/all/state/2024-sales-taxes/ https://taxfoundation.org/data/all/state/2024-sales-taxes/
  - insane_dreamer 2y ago
_7acn 2y ago
It's important to understand that (in simple terms) businesses do not actually pay VAT. VAT is a tax that ultimately burdens consumers, not companies. When a business purchases a product that includes VAT, it initially pays the VAT amount. However, when the same business later issues invoices for its own products or services (also including VAT), it is required to remit the VAT to the tax authorities minus the VAT it has already paid on its own purchases. In practice, this means that if you sell something with VAT to a company, the VAT component is irrelevant to that company. This is, of course, a simplified explanation, but fundamentally, that's how the system works.
- RhysU 2y ago
  Who collects the float on the VAT for these intermediate businesses between when they pay it and when they are reimbursed?
  - fransje26 2y ago
    B2B transaction are generally VAT free. In the event that VAT has been paid, the reimbursement goes via the tax authorities.
    - RhysU 2y ago
      How long do the tax authorities sit on those payments before reimbursing them?
      - fransje26 2y ago
        I don't know about the modalities in all the EU countries, but generally it's an indirect reimbursement, deducting the VAT you payed extra from the VAT you're supposed to hand over to the tax authorities. The readjustments are done monthly.
      - locallost 2y ago
        It's not real reimbursement, you were reimbursed already when you "added value" and sold the goods or services to someone else for more than you paid for. The money you took contains VAT and most of that you will keep yourself because you paid for it. You will the take the say 20% you collected when you sold goods, subtract the VAT your supplier put on their invoice to you and give the rest to the government. You are in a way reimbursing the government. It's possible to get reimbursed by the government if you spent more money on VAT than you collected yourself - it happened to me as a freelancer if I spent more money on bills but either didn't generate any income or worked for foreign companies and my invoices were VAT free. When all of this happens depends on the jurisdiction I guess. I had to do it quarterly. Some other people I know did it yearly. "Real" companies are probably again different, and different in different countries.
4ndrewl 2y ago
Logic doesn't matter, these are all power plays. Truth be damned. Just like Trump exclaiming that it's "unfair" that Europeans don't buy American cars - we don't have big enough streets and fuel is 4 x as expensive.
Alcatros552 2y ago
[flagged]
- outside1234 2y ago
  Exactly. When the products ARE good, Europeans use a ton of them. See iPhone.
jujube3 2y ago
Even if the VAT tax ends up being the same for imported goods versus domestically produced goods, that is still a discriminatory tax against the import. The reason is because the imported good already paid taxes in the country it was produced in. It makes sense for a German car manufacturer to pay taxes to Germany, since the German state provides it with services (roads, police, infrastructure.) It makes no sense for an American car manufacturer to pay taxes to Germany since it gets no services from Germany. (And no, earning the "privilege" of unloading the car from the boat isn't worth 20%.) If the EU has an interest in making this fair, they can remit the sales tax they collected to the US government. Or they can just accept that this is a discriminatory tax and may incite another discriminatory tax on the US side.
- nonethewiser 2y ago
  Yeah the distinction doesnt mean anything from the US perspective.
- bathtub365 2y ago
  On the off chance that someone in Germany buys an American car, wouldn’t the purchaser be the one paying VAT? I.e. not the manufacturer
- vuxie 2y ago
  This is not how a VAT works. An American car manufacturer _selling_ a car to Germany means that the importer on the German side pays the tax, not the American. VAT is always applied to the buyer, not the seller.
  - xyzzy9563 2y ago
    Isn't that how regular tariffs work too?
    - watwut 2y ago
      Tariff is applied to import and export. VAT is applied to everything, including domestically produced things. German cars pay the same VAT which makes it fundamentally different them VAT. So, stop lying.
gotoeleven 2y ago
Unless I missed something, this is the entire explanation of why the VAT isn't like a tariff: >>>VATs are border-adjusted, meaning they rebate tax on exports and impose tax on imports. Despite the appearance of subsidizing exports and punishing imports, however, a border-adjusted VAT is trade neutral. A border adjusted tax leads to currency appreciation for the imposing country, which would make it cheaper to import goods, more expensive to export goods, and thus would cancel out the apparent benefits of the tax on imports and the rebate on exports. The rest of the article is just about how US sales tax sucks. So VATs are not like a tariff because they put pressure on currencies to adjust in value? Huh? Can someone explain what taxfoundation is talking about? If I make two ford fiestas, one in the US and one in Germany and they are otherwise identical--identical labor costs, identical shipping costs, etc etc--do I have to sell each ford fiesta in germany at a different cost to the consumer (so including all taxes levied on the consumer) for me to make the same profit on each fiesta? If so, then I dont see what is dishonest about likening the VAT to a tariff.
- Ekaros 2y ago
  Cost inside Germany are inclusive of VAT. So German manufacturer pays to their supplier price of item + VAT. VAT is send to tax man. And when they then sell it to consumer they get to deduct from VAT they charge the amount they were charged themselves. So in the end consumer pays all of the VAT. When you ship car to Germany, you have to charge this VAT from consumer too. But now as you did not previously pay any you charge full amount and get nothing back. In each step inside Germany the intermediate buyer was charged more than outside where there were no VAT.
  - gotoeleven 2y ago
    Well from peer comments and examples it seems like the difficulty is that a car company will have to pay VAT on the full value of the car if it is imported, but only end up in net paying VAT on the portion of value that they added if they didn't import the car. Wouldnt it be more fair to just charge VAT on the value that the importer is adding, rather than the entire value? I suppose they would if they could but its impractical for international trade. It seems like most people in this thread are just using it as an opportunity to shit on Trump but I have yet to see an explanation for why this argument is dishonest. The effect of the VAT seems pretty tariffy.
bigbacaloa 2y ago
VAT is the most regressive sort of tax and gives the lie to the myth of Europe as a socialist paradise. In Spain it's used because it's much easier to collect than are income taxes, which lots get away without paying.
rayiner 2y ago
> Trump commonly mentions that the EU charges a 10 percent import tax on US vehicles while the US only levies a 2.5 percent tariff on European cars coming into the US That seems pretty significant no? Why do we need German cars anyway?
- eigart 2y ago
  They are better. Edit: This is a bit tongue in cheek, but I imagine there's a limited demand for american vehicles in Europe just due to the market fundamentals. Raising tariffs on European vehicles disproportionately harms american consumers. Tesla has a significant production capacity in Europe, probably because it was in demand in Europe.
  - rayiner 2y ago
    But are they better enough that it’s worth exporting jobs and industrial capability abroad?
    - eigart 2y ago
      I think it’s the other way around. US and China is applying a downward pressure on EU taxes and labor rights, and VAT balances it by treating everyone equally. Keep in mind, a German built vehicle pays VAT on all the imported materials and components too. I imagine that is a significant share. When most other countries apply VAT, I think the correct counter for the US is to do the same.
- aredox 2y ago
  Yeah but these are tarriffs. Negotiate, if you want to get them away - but Trump has shown that his own word (the "beautiful" trade deal he signed during his first term) is worth absolutely nothing.
diegocg 2y ago
The Trump team is not stupid and understands that the Vat tax is not discriminatory. The problem is in their logic and propaganda - "USA has a trade deficit because everyone is taking advantage of us". Then they look here at the EU and it turns that it has very low tariffs for the US, and the trade still has a large deficit. That goes against everything they say, so what excuse are they going to use against Europe? They are not going to admit that their logic doesn't follow problem is elsewhere. And they know perfectly well that because the Vat tax is not a tariff, and because EU governments depend on the revenue they get from it, it is impossible for them to get rid of it. They really want these tariffs just because that's what they believe, that tariffs are 100% good, the reasoning doesn't matter
- maxerickson 2y ago
  I curious why you point to them doing stupid things for stupid reasons and but still seem certain they aren't stupid. "USA has a trade deficit because everyone is taking advantage of us" is stupid!
bitshiftfaced 2y ago
> If there is a complaint to be made about tax policy and implications for US competitiveness in Europe, it is about uncompetitive state sales tax structures in the US system that yield what is known as “tax pyramiding.” The average state sales tax is probably less than half the average European VAT, so even when you double tax, state taxes are likely still more competitive. > If a European resident orders from a US retailer, they do not pay US sales tax, just like a US consumer can obtain a VAT rebate on purchases of European products. Neither is a subsidy. These are simply consumption taxes falling on the consumer. I wonder how often the US consumer actually gets a VAT rebate on their imported purchases, or how many US consumers are even aware of this.
- jsnell 2y ago
  > I wonder how often the US consumer actually gets a VAT rebate on their imported purchases, or how many US consumers are even aware of this. It's quite unlikely they would have been charged VAT in the first place if buying online. The seller would have noted that the destination was not within the common market, and shown prices without VAT included. This mostly matters when you're physically in the EU when making the purchase but will leave the EU before using the item. In that case you can get a VAT refund when leaving the country. This tends to be well advertised both at the airport and at the stores that tourists are most likely to shop at.
- orwin 2y ago
  When I was a student (and poor), the average VAT I paid on products was less than 5% (I only paid for food and had student prices for transportation and musical school, so no Vat on that). Healthcare was also 0%. So it really depends on your situation.
surfingdino 2y ago
VAT is a complex system that encourages fraud, which encourages expansion of tax collection and investigation forces. It is also treated differently from income tax. As any tax advisor in Europe will tell you, disparities in VAT reporting and payments/claims are treated with more suspicion by the tax authorities than similar issues with income tax. It is sometimes called a 'punitive tax', because the default behaviour of tax authorities is to fine you. The cost of compliance is also prohibitively high, even if you find an agent who will deal with various EU members' tax authorities, some (hello, France and Germany!) require suppliers to register and report/pay directly. It is a Byzantine system that's designed to stop growth, exclude small businesses, and entrap taxpayers. As a European, I would love for it to go to hell and never come back.
- aredox 2y ago
  Even if it was true (spoiler: it's completely wrong), it still wouldn't be a tarrif.
  - surfingdino 2y ago
    I am not saying it's a tariff, but it is an additional cost and not an insignificant one both in time and money.
rattlesnakedave 2y ago
When EU manufacturers sell products to other EU countries, they get their domestic VAT rebated, pay no tariffs, and then charge the destination country's VAT. When US manufacturers sell to EU countries, we have no VAT to get rebated, must pay significant tariffs (often 10%), and then charge the destination country's VAT. The end result is US products face a significantly higher total tax burden in EU markets compared to EU-made products, while EU products entering the US face much lower tariffs (often just 2.5%). You can explain the technical mechanics of VAT all day long, but it doesn't change this basic mathematical disadvantage for US exporters. Telling us we "just don't understand how VAT works" is condescending and deflects from addressing this real competitive imbalance.
- tobias3 2y ago
  B2B sales from the US to the EU have no VAT. B2B sales between European countries have no VAT. If you sell to a consumer you pay the VAT where it is consumed. Please stop spreading lies.
- eqvinox 2y ago
  Just because someone explains something to you in a condescending way doesn't mean that that thing isn't still true, and doesn't mean you can dismiss it as condescending. Complaining that you don't have any VAT to be rebated is strong proof that you in fact don't understand how VAT works. I'll save you my presumably-condescending explanation and would recommend you find some other resource to learn about VAT…
  - rattlesnakedave 2y ago
    Actually I can do whatever I want. This is an internet comments section, not a court of law.
    - eqvinox 2y ago
      Indeed this internet comment section is not a court of law, it is one of public opinion. As of my posting this, you are being judged wanting. As for what you should or shouldn't do, please refer to https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html - if you break these guidelines hard enough, that "shouldn't" will turn into a "can't" at some point. Remember: freedom of speech guarantees only your talking, not anyone's listening or even amplification. (And now we're entirely off-topic, so I'll take my leave.)
Ekaros 2y ago
VAT is paid by consumers. If I buy locally I am charged the VAT, as we are sensible place it is included in to the price. So I don't have to do mental math every time what is 25.5% on top of 13.37€... But if I import something myself I need to pay the VAT (and possible tariffs) on the price I paid and shipping. And the handling that posti here charges... So in the end I am paying it. Ofc, making your customs to handle each package separately each time is sub-optimal so with large enough entities there is more automation and rules. But still I am one that pays for it as consumer.
dboreham 2y ago
If you're american just perform a global replace of "VAT" with "sales tax" and move on. VAT is a bit better than a sales tax because businesses get to "deduct", logically, the tax they pay on goods they buy (mostly) from the sales tax they collect from their customers.
ltbarcly3 2y ago
I love that the example VAT is 5% in this article to show that 'sales tax with pyramiding' can actually be higher, as much as 6.5% in the example. The sales tax where I live is actually 5%. The standard VAT in the UK is 20%!
- milesrout 2y ago
  That is irrelevant. UK consumers pay more sales tax than American consumers. That doesn't and shouldn't matter to American exporters, because UK consumers pay the same rate of VAT on imports from the EU, imports from the US, imports from New Zealand (which has a 15% VAT called GST) and domestically produced goods and services.
  - ltbarcly3 2y ago
    Its not irrelevant, it means there is an untapped 20% tax we can put on goods to raise funds for government programs. The liberals in the US seem to think this would cause economic collapse. If we exempt domestic goods that is what is irrelevant.
- aredox 2y ago
  >The standard VAT in the UK is 20%! Yeah, and that pays for stuff like NHS. In the US you'd pay a medical insurance anyway. Compare comparable things.
  - ltbarcly3 2y ago
    Great! So we can put a 20% tax on goods without causing serious economic harm, just like the UK does. Then we can exempt domestic goods because why not.
    - fransje26 2y ago
      > Then we can exempt domestic goods because why not That's clearly not how VAT works. The VAT rate is the same for locally produced goods as for imported goods of the same category.
firesteelrain 2y ago
Here is the US viewpoint. VATs offer an unfair competitor disadvantage for US companies engaged in international trade. US relies primarily on corporate and income taxes. This creates an asymmetry in taxation that affects trade. When US companies sell goods abroad, they don’t get a tax refund because the US has no VAT. Trump is partially right that US companies face an additional tax burden that foreign companies avoid which he essentially equates to a hidden tariff. But because the US does not have a similar VAT system then it puts the US at a disadvantage. We can debate the wisdom of reciprocal tariffs but he clearly wants production brought back here and for Europe and other countries to stop taking advantage of the US. So he is taking measures he believes will address that.
- dzogchen 2y ago
  Sorry, but I really do not understand the point you are making. Consumers in the EU pay the same VAT on products from the EU as from products from the US. There is no unfairness. Businesses in the EU do not have to pay VAT, whether from the EU or from US. The only "additional tax burden" that US companies face are US internal taxes.
  - firesteelrain 2y ago
    You are technically correct however your comment overlooks the structural disadvantages that US businesses face due to lack of VAT. VATs are pass thru to the consumer as other comments on here have indicated. There is no inherent discrimination between US and EU products in terms of VAT rate. It’s neutral within the country. A US company selling to the EU still has to factor in US corporate taxes in its pricing and does not get a VAT rebate. And due to structural disadvantages, US does not have a VAT to refund like EU countries when they export. EU countries can price their goods more competitively. Given those facts, Trump views VAT as a hidden tariff that puts the US at a disadvantage.
    - Muromec 2y ago
      >EU countries can price their goods more competitively. Assuming we talk about US consumers -- EU manufacturer is more (?) competitive by not paying VAT on their manufacturing, the same way US companies don't on their domestic production. Where is an advantage exactly? >A US company selling to the EU still has to factor in US corporate taxes in its pricing and does not get a VAT rebate Which VAT rebate they should get if they and their suppliers didn't pay VAT in the first place? They get back 0 USD of the 0% VAT rate in US. Sounds about right.
jimnotgym 2y ago
For a bunch of supposedly smart people there is some really profound misunderstanding of European VAT on this thread. I was going to put it right but I can't be bothered with the pedantic armchair experts. I'm in Finance at a large multinational, and I'm responsible for over $100m of trade in goods across the world. I'm going to state the facts and armchair pedants be damned. My business pays no VAT. I reclaim all import VAT and any other purchase VAT. I can't reclaim import duties (tariffs). Therefore VAT is not a tariff. The end.
daft_pink 2y ago
I don’t think the intention is for it to be a discriminatory tax, but the end result is that it is.
- talldayo 2y ago
  America could draft new agreements, or failing that join the EU even. But apparently Americans are on their isolationism kick so I don't think they're coming to the table with much leverage that Europeans want. Plus, the way America fights against common-sense regulation absolutely deserves discrimination abroad. I say that as a taxpaying American too - bring our businesses to heel or have them removed from Europe entirely.
grumblingdev 2y ago
If people are willing to buy my product for $100 at most, I will earn $83 pre VAT (20%). If my product costs $73 to make, then I make $10 profit, and the government earns $17. The government then spends this $17 to the benefit of the citizens of that country. The tax burden either falls on the producer or the consumer depending on price elasticity of demand. High elasticity would result in the producer needing to absorb the VAT. But high elasticity for individual products usually results from increased competition. But if there is not much competition, and elasticity is still high, then the company's profit margins are being eroded by the tax, with a greater share going to the government. If the average price elasticity of demand for imports is higher than domestic production, then one could argue this is not fair. Also, each EU country has certain discretion over how to charge VAT for groups of products so there is the potential for unfairness and tariff like impacts. But I will admit that it is a difficult case to make that a consumption tax is discriminatory.
MoonShot7 2y ago
There are also different rates from different countries, so applying a 25% retaliatory tariff is questionable. Even in the UK, they have different rates (5% - 20%): https://www.vatcalculators.co.uk/ https://www.vatcalculators.co.uk/

179 points by dzogchen 2y ago

deleted 2y ago

[deleted]

Well, because we don’t have a VAT, it is, isn’t it? The article puts the blame on the US sales tax system. But regardless, US exporters to the EU end up paying more taxes than domestic EU producers. > Europe’s VATs are not tariffs and are not subsidizing European exports. Instead, US states’ poorly-designed sales taxes are harming their own businesses’ competitiveness—whether they’re selling down the street, across state lines, or around the world.

misinfo2024 2y ago
[dead]
jakewins 2y ago
Sorry I don’t follow - how does VAT make US exporters pay more than domestic EU manufacturers? They are both subject to the same VAT, or?
- surfmike 2y ago
  Because they are not able to deduct US state sales taxes on business inputs from the final VAT. While Europeans can deduct their local (VAT) taxes on business inputs.
  - jakewins 2y ago
    I still don’t follow. If the VAT was completely removed, US businesses would still pay state sales taxes on inputs and EU manufacturers would not? The two things seem unrelated?
- aredox 2y ago
  It doesn't. It has never been. Trump is a liar and a crook and is bullshitting you.
NewJazz 2y ago
For a VAT to work they have to levy the tax at each stage. Import is a stage... But regardless, US exporters to the EU end up paying more taxes than domestic EU producers. No, because the domestic EU producers are paying VAT at each stage of their production process. The US manufacturers need to catch up!
- kvemkon 2y ago
  > the domestic EU producers are paying VAT at each stage of their production process. As long as I know, VAT should be payed only once for a finished product when sold to the very end customer.
  - Muromec 2y ago
    No. The vat is payed by the seller on full price of what they sell. So does their supplier. The trick is -- yoy get tax credits when your supplier is a vat payer. As a result, the tax is collected in parts over the final price sold to the non-business customer. Which is why being a registered one man company with a vat number allows you to get back vat for your laptop
- surfmike 2y ago
  We pay sales tax on business inputs as well. But unlike European producers, that tax is not deductible from from the final VAT.
  - NewJazz 2y ago
    Sounds like we need our own VAT.
akoncius 2y ago
> But regardless, US exporters to the EU end up paying more taxes than domestic EU producers. but only because of tariffs, not VAT system. we pay VAT regardless from where the good came from.
tdb7893 2y ago
As an American I don't really deeply understand VAT but I don't get why an American car would pay more overall VAT than a domestically produced car. My impression is that VAT will be the same for items that cost the same, no matter where they are produced.
- stuaxo 2y ago
  It will be the same, you were right.
- Muromec 2y ago
  The idea behind vat is to spread the sales tax across the chain, which means the government gets the money even if the end product didnt reach the customer. Naturally the chain breaks at the border, so importers pay vat and exporters get vat refunds. In the end its just a sales tax
  - bardak 2y ago
    The main purpose of VAT is to not fully apply a consumption tax multiple times through manufacturing and distraction
    - surfmike 2y ago
      Exactly, and for American producers, sales tax does get applied multiple times and can’t be deducted from VAT
      - alexanderchr 2y ago
        Not true, see for example https://comptroller.texas.gov/taxes/publications/94-124.php https://comptroller.texas.gov/taxes/publications/94-124.php
- aredox 2y ago
  I don't get why you believe the liars who told you an American car would pay more overall VAT than a domestically produced car. I mean, you are getting lied to your face, by someone who is a serial liar, so why are you trying to find an explanation for something that doesn't exist?
AndrewDucker 2y ago
VAT applies equally to imported goods and locally produced goods.
smooc 2y ago
VAT is applied on every good sold. So no. If you are able to produce cheaper and shipped cheaper than your EU competitor it will be cheaper when a consumer buys it. The consumer pays the VAT, not the producer.
- surfmike 2y ago
  Your European competitor will be able to deduct all their local VAT taxes on business inputs but you won’t be able to deduct your local sales taxes on your inputs.
aredox 2y ago
Are you dense? The VAT applies to all purchases and doesn't discriminate on where an item is produced. Have Americans become really that dumb?
- devuo 2y ago
  I think it's more a case of intellectual dishonesty.
  - ceejayoz 2y ago
    https://www.urbandictionary.com/define.php?term=The%20Rule%20of%20Goats https://www.urbandictionary.com/define.php?term=The%20Rule%2...
    - watwut 2y ago
      Yeah and no. I would see intellectual dishonesty as worst and the fact that we did not called it that for years enabled these people. They were giving all possible benefits of the doubt. And calling them dumb is kind of benefit of the doubt.
- School-Cotton 2y ago
  > Have Americans become really that dumb? It’s not a question of being dumb or not, but rather that VAT doesn’t exist in the US so most people don’t understand how it works, if they have even heard of it at all. Instead of VAT, most states have sales tax, which is similar in spirit but doesn’t work the same way.
  - coolgoose 2y ago
    I mean, I get it to some extent, but there's literally an article linked on this whole thread that we're all commenting, explaining why not...
  - nabla9 2y ago
    The linked article explains VAT. Being confidently wrong in the comment section is dumb and arrogant.
przemub 2y ago
Lol no.
Tzk 2y ago
You pay VAT on all products when they’re sold or imported. In Germany it’s 19% and called “Mehrwertsteuer” for the domestic products and “Einfuhrumsatzsteuer” for imported products. There’s an additional Import tax on some products.
epolanski 2y ago
No both pay the very same amount of taxes.
wesselbindt 2y ago
Whether or not some action is discriminatory is inherent to that action. Something I do can't be considered discriminatory because of what someone else does. So for example, if I shake hands with all people of all colors, you cannot call that discriminatory just because my neighbor doesn't shake hands with people. That would be completely nonsensical. Similarly, if the EU applies VAT to all goods sold, that can't be considered discriminatory just because some other country doesn't apply VAT.
gamblor956 2y ago
Non-European companies don't pay VAT or deal with VAT compliance unless they have sufficient business in Europe that they are required to register for local tax compliance. European customers handle the VAT themselves when dealing with non-VAT-registered non-European suppliers; this is known as the "reverse charge" mechanism and it's generally a feature of almost every VAT system in the world. (In a nutshell, the customer charges themselves VAT and pays it on their own VAT return. This is similar to the way "use tax" works in the U.S.)
bigbacaloa 2y ago
[dead]

vages 2y ago

I really liked the critique of the US sales tax. I did not know such taxes still existed.

cjs_ac 2y ago

> Note that, while a VAT is imposed at every stage of the process, the net effect is to apply the rate one time to the final sales price. The tax is collected in increments (on the “value added” at each stage), but unlike with a pyramiding sales tax, it does not double tax inputs. The VAT and ideal sales tax share an identical tax base and, if imposed at the same rates, yield identical collections. The VAT is important in Europe, because if a product is manufactured in many countries, each of those countries gets a share of the tax revenue.

tobias3 2y ago
B2B sales between European countries don't have a VAT.
- deleted 2y ago
  [deleted]
- procaryote 2y ago
  VAT on b2b sales even within an European country are usually not that important. You add VAT to things you sell (e.g. car repair services), you pay VAT on things you buy (e.g. car parts). If you collected more VAT on sales than you paid on purchases, you owe that to the tax department. It's a bit of book-keeping but doesn't affect your profits directly.
- luckylion 2y ago
  They do, it's just that many choose the reverse charge mechanism, so the recipient of the services or goods is responsible for paying the VAT to his tax authority. It makes things easier, it doesn't remove VAT.
  - beejiu 2y ago
    For almost all B2B cross-border transactions between two VAT registered entities, the reverse charge is mandatory, not something that you can choose to opt in to.

devuo 2y ago

Comparing VAT to an Import Tax is unbelievably stupid.

r0ckarong 2y ago
That's what it says on the flag don't it?
- marcosdumay 2y ago
  On a tangent, Trump decided to punish Brazil be setting the import tax on ethanol as whatever Brazil sets for importing US ethanol. Now that our government controls the domestic price of fuel in the US, it's too bad Lula doesn't seem to be in a trolish mood...
  - watwut 2y ago
    I do not understand what do you mean here?
    - tuukkah 2y ago
      If the president of Brazil, Lula, decides to increase import taxes, the US will mirror this decision. As a result, Lula has set a tax rate that US applies on imports and that US buyers end up paying to the US government.
      - dmix 2y ago
        The US is still entirely in control of the rate.
        tuukkah 2y ago
        No, while you mirror, you are not in control. But sure, you can decide to stop the mirroring that you started even though now it puts you in a worse situation than where you started. Say, Lula sets the import tax at 100% - will Trump say "that's too high a number for me, I fold"? In that case, he wanted the rates to be the same but now the difference is even higher.

seydor 2y ago

Of course it's not. In fact the complexity of vat in europe is a disadvantage when dealing with things like small transactions. We have resorted to using an American company as a merchant of record to manage the complex invoicing for us, even if they keep a percentage of the sales.

gamblor956 2y ago
VAT is simple unless your company has a very large, broad set of products. It's a PITA to deal with due to the invoicing and documentation requirements, but that's due to the volume of work required, not the complexity of it.
- kyrra 2y ago
  So it's simple but hard?
  - secondcoming 2y ago
    Simple but tedious
  - surfingdino 2y ago
    Expensive. Dealing with all EU tax authorities is expensive and that cost can be prohibitive for smaller businesses.
  - gamblor956 2y ago
    It's simple but it's a lot of busywork. This can be expensive for companies with a lot of purchases as the tax authorities demand a copy of every invoice regardless of the size of the transaction. Other than the volume of paperwork involved, the actual technical aspects of VAT are far simpler than sales tax, as most countries only have a handful of VAT rates.
- milesrout 2y ago
  Yeah unfortunately EU countries have adopted complicated VAT systems in the sense that they have different rates on different categories of goods and services. New Zealand has a much more sensible system: other than a few categories of services that are zero-rated (like land) for GST (what NZ calls VAT) everything is charged at a flat rate of 15%. It eliminates all the bullshit like decade long court proceedings about whether something is a cake or a biscuit, or silly social media campaigns about whether tampons are "luxury goods". It is all taxed at 15%. That being said, the system is not more complex in the EU really, just more annoying.

coolgoose 2y ago

I find it funny that a lot of people can't read the article, so here's an ELI5 case on why VAT isn't discriminatory from our lovely Franch LeChat. Going to add TLDR for people: Vat applies to all shit on the market, regardless of where the fuck you produced it. --- The Value Added Tax (VAT) in Europe is designed to be a consumption tax that applies equally to both domestically produced goods and imports. This means that whether a product is made locally or imported from another country, the same VAT rate is applied when the product is sold to the end consumer. This approach is intended to create a level playing field, ensuring that local producers do not have an unfair advantage over importers, and vice versa. The reason VAT is not considered discriminatory against imports is that it is applied at the point of consumption rather than production. When goods are imported into the EU, they are subject to VAT at the same rate as similar goods produced within the EU. This ensures that the tax burden is the same for both local and imported products, promoting fair competition. Additionally, businesses can often reclaim the VAT they pay on purchases, including imports, which further neutralizes any potential disadvantage. However, it's important to note that while VAT itself is not discriminatory, other factors such as customs duties and regulatory standards can still affect the competitiveness of imports versus local produce. These factors are typically addressed through separate trade policies and agreements rather than through the VAT system.

lazyeye 2y ago
And if you read a previous comment it effectively means imported goods are taxed twice. Both in their country of manufacture and then again in the country where they are sold. It makes sense to tax local companies with a VAT tax to fund their local govt/infrastructure. But imports are get nothing for that tax. If you are a European exporter and there is no tariff/tax in your export destination then you only get taxed once. And thats why "where the fuck you produced it" matters.
- rahkiin 2y ago
  But those taxes serve different purposes? On fuel we have VAT (for commerce) and also other taxes (for road maintenance). Get yourself a good transatlantic deal to get rid if import taxes (and stick to it)

deleted 2y ago

[deleted]

grg0 2y ago

Is Stephen Miller really that stupid, or does he have an agenda to gut American business? One really has to wonder if he's actually a spy from an adversarial nation.

markhahn 2y ago
motivated reasoning is the main problem.
mullingitover 2y ago
Everything with these people makes sense when you understand that they want to break down the United States into their own corrupt little fiefdoms. They are anti-Union, not just with workforces, but with nations, because united people are harder to exploit.
- 9283409232 2y ago
  This is why the way to fight them is to get involved in your local communities. Get off social media and get involved locally. Talk to people, help people.
ronbenton 2y ago
By weakening its ties with Europe and other allies, the US is undoubtedly taking actions that benefit both Russia and China. That's not to say the president or his team are in cahoots with one or both of those countries, but these are the kinds of actions the US would be taking if that level of conspiracy were to be true.
outside1234 2y ago
You can't look at this as having logic. It is a mob shakedown of everyone, including you.
9283409232 2y ago
There are a couple goals here. They would like to tank US economy so oligarchs can buy it for pennies on the dollar. Oligarchs like Elon and Thiel want to own their own cities called Network States. You can find more details about that here https://www.thenerdreich.com/ https://www.thenerdreich.com/ Trump is owned by Russia and China so turning America away from Europe weakens them. Like Zelenskyy says, Russia is likely going to attack NATO within the next couple years so breaking them away from America takes away a very powerful ally. Europe likes to twiddle their thumbs so he is betting that they won't get their shit together and odds are he is right. The EU moves slowly and is very nonsensical. The real play that not even Trump sees coming is putting JD Vance behind the desk. Elon and the rest of the billionaire class are just using Trump to set the table for Vance. Once that happens we are all truly fucked.

markhahn 2y ago

egads. stephen miller is another festering embarrassment to the country.

lucasyvas 2y ago

This is going to be used as the basis of the tariff. It doesn’t matter if the Trump administration is correct. Take it from a fentanyl-slinging Canadian - they’re either dumb or grasping for straws / full of shit. They are telling you tariffs are coming and they have identified the scapegoat to communicate to their voter base. That’s all you need to know. I’m honestly not sure why anyone is bothering discussing it since it’s a waste of time. If you are debating it, it means you are already behind the curve of understanding of where it’s going.

jamesblonde 2y ago
No idea why you're getting downvoted. The rules of the game have changed. The rational actors will have to adapt.
- lucasyvas 2y ago
  Bots or people in complete denial. People are waking up a bit slower than expected to the reality of what is happening. I completely understand in a way, because it only becomes clear once the barrel is pointed at you. At that point, it’s too late. Trying to help out where I can - this is all misdirection. I’m sure there are a lot of smart people on here fascinated by pattern recognition. It’s their time to shine.
- layer8 2y ago
  It’s being discussed so that people don’t believe this is actually rational.
  - lucasyvas 2y ago
    I appreciate your optimism but the people you hope to convince are no longer listening.
    - layer8 2y ago
      Some are, as evidenced in this very thread.

loxodrome 2y ago

[flagged]

aredox 2y ago
Yeah, yeah. Go to Somalia, Galt.
secondcoming 2y ago
The UK is also typically 20%. Basic items such as bread and feminine hygiene products are VAT free.
Muromec 2y ago
If 20% is confiscatory, try looking at how alimonies are calculated.

bikson 2y ago

Let's wait until they learn about public health care.

fransje26 2y ago
They are going to tax the EU for it, because unfair competition.

alexey-salmin 2y ago

> Despite the appearance of subsidizing exports and punishing imports, however, a border-adjusted VAT is trade neutral. A border adjusted tax leads to currency appreciation for the imposing country, which would make it cheaper to import goods, more expensive to export goods, and thus would cancel out the apparent benefits of the tax on imports and the rebate on exports. This isn't even remotely true

ReptileMan 2y ago

From the point of view of a US company VAT and Tarif are indistinguishable - they make exports 20% more expensive, so US company export less.

aredox 2y ago
It completely wrong as it applies to local goods too.
tzs 2y ago
Nope. The difference is that a tariff only applies to imports, whereas a VAT applies to all sales in the country regardless of whether they are imports or domestic. The former puts imports at a competitive disadvantage. The latter does not.

Taniwha 2y ago

If you're going to start equating VAT (essentially sales tax) with tariffs you open the whole nightmare can of worms that is US sales tax to the rest of the world - for those not living in the US every state, and in some cases every county has its own sales tax rate ....

nxm 2y ago
Sales tax is the same across all goods sold in the US, irrespective of whether they were imported or not. VAT rate differ based on the origin which is the issue
- fiddlerwoaroof 2y ago
  This isn't true: local (to me) jurisdictions vary between an 8ish% sales tax and a 10% sales tax. In many states, there's no sales tax on food but food is taxed in Alabama. There's any number of variations of this in the US.
- watwut 2y ago
  > VAT rate differ based on the origin which is the issue Which is a lie. They do not differ based on the origin and that is not the issue. The issue is that American top politicians are used and enabled to brazenly lie and their voters spread it happily.
- falcor84 2y ago
  In what way does VAT differ based on the origin? All VAT is cancelled out except for the final purchase by a consumer, no?
- alistairSH 2y ago
  WTF? No. Not even remotely true. Rates vary by state and locality. And vary across type of good being sold. You couldn’t be more wrong if you tried. https://taxfoundation.org/data/all/state/2024-sales-taxes/ https://taxfoundation.org/data/all/state/2024-sales-taxes/
- insane_dreamer 2y ago

_7acn 2y ago

It's important to understand that (in simple terms) businesses do not actually pay VAT. VAT is a tax that ultimately burdens consumers, not companies. When a business purchases a product that includes VAT, it initially pays the VAT amount. However, when the same business later issues invoices for its own products or services (also including VAT), it is required to remit the VAT to the tax authorities minus the VAT it has already paid on its own purchases. In practice, this means that if you sell something with VAT to a company, the VAT component is irrelevant to that company. This is, of course, a simplified explanation, but fundamentally, that's how the system works.

RhysU 2y ago
Who collects the float on the VAT for these intermediate businesses between when they pay it and when they are reimbursed?
- fransje26 2y ago
  B2B transaction are generally VAT free. In the event that VAT has been paid, the reimbursement goes via the tax authorities.
  - RhysU 2y ago
    How long do the tax authorities sit on those payments before reimbursing them?
    - fransje26 2y ago
      I don't know about the modalities in all the EU countries, but generally it's an indirect reimbursement, deducting the VAT you payed extra from the VAT you're supposed to hand over to the tax authorities. The readjustments are done monthly.
    - locallost 2y ago
      It's not real reimbursement, you were reimbursed already when you "added value" and sold the goods or services to someone else for more than you paid for. The money you took contains VAT and most of that you will keep yourself because you paid for it. You will the take the say 20% you collected when you sold goods, subtract the VAT your supplier put on their invoice to you and give the rest to the government. You are in a way reimbursing the government. It's possible to get reimbursed by the government if you spent more money on VAT than you collected yourself - it happened to me as a freelancer if I spent more money on bills but either didn't generate any income or worked for foreign companies and my invoices were VAT free. When all of this happens depends on the jurisdiction I guess. I had to do it quarterly. Some other people I know did it yearly. "Real" companies are probably again different, and different in different countries.

4ndrewl 2y ago

Logic doesn't matter, these are all power plays. Truth be damned. Just like Trump exclaiming that it's "unfair" that Europeans don't buy American cars - we don't have big enough streets and fuel is 4 x as expensive.

Alcatros552 2y ago

[flagged]

outside1234 2y ago
Exactly. When the products ARE good, Europeans use a ton of them. See iPhone.

jujube3 2y ago

Even if the VAT tax ends up being the same for imported goods versus domestically produced goods, that is still a discriminatory tax against the import. The reason is because the imported good already paid taxes in the country it was produced in. It makes sense for a German car manufacturer to pay taxes to Germany, since the German state provides it with services (roads, police, infrastructure.) It makes no sense for an American car manufacturer to pay taxes to Germany since it gets no services from Germany. (And no, earning the "privilege" of unloading the car from the boat isn't worth 20%.) If the EU has an interest in making this fair, they can remit the sales tax they collected to the US government. Or they can just accept that this is a discriminatory tax and may incite another discriminatory tax on the US side.

nonethewiser 2y ago
Yeah the distinction doesnt mean anything from the US perspective.
bathtub365 2y ago
On the off chance that someone in Germany buys an American car, wouldn’t the purchaser be the one paying VAT? I.e. not the manufacturer
vuxie 2y ago
This is not how a VAT works. An American car manufacturer _selling_ a car to Germany means that the importer on the German side pays the tax, not the American. VAT is always applied to the buyer, not the seller.
- xyzzy9563 2y ago
  Isn't that how regular tariffs work too?
  - watwut 2y ago
    Tariff is applied to import and export. VAT is applied to everything, including domestically produced things. German cars pay the same VAT which makes it fundamentally different them VAT. So, stop lying.

gotoeleven 2y ago

Unless I missed something, this is the entire explanation of why the VAT isn't like a tariff: >>>VATs are border-adjusted, meaning they rebate tax on exports and impose tax on imports. Despite the appearance of subsidizing exports and punishing imports, however, a border-adjusted VAT is trade neutral. A border adjusted tax leads to currency appreciation for the imposing country, which would make it cheaper to import goods, more expensive to export goods, and thus would cancel out the apparent benefits of the tax on imports and the rebate on exports. The rest of the article is just about how US sales tax sucks. So VATs are not like a tariff because they put pressure on currencies to adjust in value? Huh? Can someone explain what taxfoundation is talking about? If I make two ford fiestas, one in the US and one in Germany and they are otherwise identical--identical labor costs, identical shipping costs, etc etc--do I have to sell each ford fiesta in germany at a different cost to the consumer (so including all taxes levied on the consumer) for me to make the same profit on each fiesta? If so, then I dont see what is dishonest about likening the VAT to a tariff.

Ekaros 2y ago
Cost inside Germany are inclusive of VAT. So German manufacturer pays to their supplier price of item + VAT. VAT is send to tax man. And when they then sell it to consumer they get to deduct from VAT they charge the amount they were charged themselves. So in the end consumer pays all of the VAT. When you ship car to Germany, you have to charge this VAT from consumer too. But now as you did not previously pay any you charge full amount and get nothing back. In each step inside Germany the intermediate buyer was charged more than outside where there were no VAT.
- gotoeleven 2y ago
  Well from peer comments and examples it seems like the difficulty is that a car company will have to pay VAT on the full value of the car if it is imported, but only end up in net paying VAT on the portion of value that they added if they didn't import the car. Wouldnt it be more fair to just charge VAT on the value that the importer is adding, rather than the entire value? I suppose they would if they could but its impractical for international trade. It seems like most people in this thread are just using it as an opportunity to shit on Trump but I have yet to see an explanation for why this argument is dishonest. The effect of the VAT seems pretty tariffy.

bigbacaloa 2y ago

VAT is the most regressive sort of tax and gives the lie to the myth of Europe as a socialist paradise. In Spain it's used because it's much easier to collect than are income taxes, which lots get away without paying.

rayiner 2y ago

> Trump commonly mentions that the EU charges a 10 percent import tax on US vehicles while the US only levies a 2.5 percent tariff on European cars coming into the US That seems pretty significant no? Why do we need German cars anyway?

eigart 2y ago
They are better. Edit: This is a bit tongue in cheek, but I imagine there's a limited demand for american vehicles in Europe just due to the market fundamentals. Raising tariffs on European vehicles disproportionately harms american consumers. Tesla has a significant production capacity in Europe, probably because it was in demand in Europe.
- rayiner 2y ago
  But are they better enough that it’s worth exporting jobs and industrial capability abroad?
  - eigart 2y ago
    I think it’s the other way around. US and China is applying a downward pressure on EU taxes and labor rights, and VAT balances it by treating everyone equally. Keep in mind, a German built vehicle pays VAT on all the imported materials and components too. I imagine that is a significant share. When most other countries apply VAT, I think the correct counter for the US is to do the same.
aredox 2y ago
Yeah but these are tarriffs. Negotiate, if you want to get them away - but Trump has shown that his own word (the "beautiful" trade deal he signed during his first term) is worth absolutely nothing.

diegocg 2y ago

The Trump team is not stupid and understands that the Vat tax is not discriminatory. The problem is in their logic and propaganda - "USA has a trade deficit because everyone is taking advantage of us". Then they look here at the EU and it turns that it has very low tariffs for the US, and the trade still has a large deficit. That goes against everything they say, so what excuse are they going to use against Europe? They are not going to admit that their logic doesn't follow problem is elsewhere. And they know perfectly well that because the Vat tax is not a tariff, and because EU governments depend on the revenue they get from it, it is impossible for them to get rid of it. They really want these tariffs just because that's what they believe, that tariffs are 100% good, the reasoning doesn't matter

maxerickson 2y ago
I curious why you point to them doing stupid things for stupid reasons and but still seem certain they aren't stupid. "USA has a trade deficit because everyone is taking advantage of us" is stupid!

bitshiftfaced 2y ago

> If there is a complaint to be made about tax policy and implications for US competitiveness in Europe, it is about uncompetitive state sales tax structures in the US system that yield what is known as “tax pyramiding.” The average state sales tax is probably less than half the average European VAT, so even when you double tax, state taxes are likely still more competitive. > If a European resident orders from a US retailer, they do not pay US sales tax, just like a US consumer can obtain a VAT rebate on purchases of European products. Neither is a subsidy. These are simply consumption taxes falling on the consumer. I wonder how often the US consumer actually gets a VAT rebate on their imported purchases, or how many US consumers are even aware of this.

jsnell 2y ago
> I wonder how often the US consumer actually gets a VAT rebate on their imported purchases, or how many US consumers are even aware of this. It's quite unlikely they would have been charged VAT in the first place if buying online. The seller would have noted that the destination was not within the common market, and shown prices without VAT included. This mostly matters when you're physically in the EU when making the purchase but will leave the EU before using the item. In that case you can get a VAT refund when leaving the country. This tends to be well advertised both at the airport and at the stores that tourists are most likely to shop at.
orwin 2y ago
When I was a student (and poor), the average VAT I paid on products was less than 5% (I only paid for food and had student prices for transportation and musical school, so no Vat on that). Healthcare was also 0%. So it really depends on your situation.

surfingdino 2y ago

VAT is a complex system that encourages fraud, which encourages expansion of tax collection and investigation forces. It is also treated differently from income tax. As any tax advisor in Europe will tell you, disparities in VAT reporting and payments/claims are treated with more suspicion by the tax authorities than similar issues with income tax. It is sometimes called a 'punitive tax', because the default behaviour of tax authorities is to fine you. The cost of compliance is also prohibitively high, even if you find an agent who will deal with various EU members' tax authorities, some (hello, France and Germany!) require suppliers to register and report/pay directly. It is a Byzantine system that's designed to stop growth, exclude small businesses, and entrap taxpayers. As a European, I would love for it to go to hell and never come back.

aredox 2y ago
Even if it was true (spoiler: it's completely wrong), it still wouldn't be a tarrif.
- surfingdino 2y ago
  I am not saying it's a tariff, but it is an additional cost and not an insignificant one both in time and money.

rattlesnakedave 2y ago

When EU manufacturers sell products to other EU countries, they get their domestic VAT rebated, pay no tariffs, and then charge the destination country's VAT. When US manufacturers sell to EU countries, we have no VAT to get rebated, must pay significant tariffs (often 10%), and then charge the destination country's VAT. The end result is US products face a significantly higher total tax burden in EU markets compared to EU-made products, while EU products entering the US face much lower tariffs (often just 2.5%). You can explain the technical mechanics of VAT all day long, but it doesn't change this basic mathematical disadvantage for US exporters. Telling us we "just don't understand how VAT works" is condescending and deflects from addressing this real competitive imbalance.

tobias3 2y ago
B2B sales from the US to the EU have no VAT. B2B sales between European countries have no VAT. If you sell to a consumer you pay the VAT where it is consumed. Please stop spreading lies.
eqvinox 2y ago
Just because someone explains something to you in a condescending way doesn't mean that that thing isn't still true, and doesn't mean you can dismiss it as condescending. Complaining that you don't have any VAT to be rebated is strong proof that you in fact don't understand how VAT works. I'll save you my presumably-condescending explanation and would recommend you find some other resource to learn about VAT…
- rattlesnakedave 2y ago
  Actually I can do whatever I want. This is an internet comments section, not a court of law.
  - eqvinox 2y ago
    Indeed this internet comment section is not a court of law, it is one of public opinion. As of my posting this, you are being judged wanting. As for what you should or shouldn't do, please refer to https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html - if you break these guidelines hard enough, that "shouldn't" will turn into a "can't" at some point. Remember: freedom of speech guarantees only your talking, not anyone's listening or even amplification. (And now we're entirely off-topic, so I'll take my leave.)

Ekaros 2y ago

VAT is paid by consumers. If I buy locally I am charged the VAT, as we are sensible place it is included in to the price. So I don't have to do mental math every time what is 25.5% on top of 13.37€... But if I import something myself I need to pay the VAT (and possible tariffs) on the price I paid and shipping. And the handling that posti here charges... So in the end I am paying it. Ofc, making your customs to handle each package separately each time is sub-optimal so with large enough entities there is more automation and rules. But still I am one that pays for it as consumer.

dboreham 2y ago

If you're american just perform a global replace of "VAT" with "sales tax" and move on. VAT is a bit better than a sales tax because businesses get to "deduct", logically, the tax they pay on goods they buy (mostly) from the sales tax they collect from their customers.

ltbarcly3 2y ago

I love that the example VAT is 5% in this article to show that 'sales tax with pyramiding' can actually be higher, as much as 6.5% in the example. The sales tax where I live is actually 5%. The standard VAT in the UK is 20%!

milesrout 2y ago
That is irrelevant. UK consumers pay more sales tax than American consumers. That doesn't and shouldn't matter to American exporters, because UK consumers pay the same rate of VAT on imports from the EU, imports from the US, imports from New Zealand (which has a 15% VAT called GST) and domestically produced goods and services.
- ltbarcly3 2y ago
  Its not irrelevant, it means there is an untapped 20% tax we can put on goods to raise funds for government programs. The liberals in the US seem to think this would cause economic collapse. If we exempt domestic goods that is what is irrelevant.
aredox 2y ago
>The standard VAT in the UK is 20%! Yeah, and that pays for stuff like NHS. In the US you'd pay a medical insurance anyway. Compare comparable things.
- ltbarcly3 2y ago
  Great! So we can put a 20% tax on goods without causing serious economic harm, just like the UK does. Then we can exempt domestic goods because why not.
  - fransje26 2y ago
    > Then we can exempt domestic goods because why not That's clearly not how VAT works. The VAT rate is the same for locally produced goods as for imported goods of the same category.

firesteelrain 2y ago

Here is the US viewpoint. VATs offer an unfair competitor disadvantage for US companies engaged in international trade. US relies primarily on corporate and income taxes. This creates an asymmetry in taxation that affects trade. When US companies sell goods abroad, they don’t get a tax refund because the US has no VAT. Trump is partially right that US companies face an additional tax burden that foreign companies avoid which he essentially equates to a hidden tariff. But because the US does not have a similar VAT system then it puts the US at a disadvantage. We can debate the wisdom of reciprocal tariffs but he clearly wants production brought back here and for Europe and other countries to stop taking advantage of the US. So he is taking measures he believes will address that.

dzogchen 2y ago
Sorry, but I really do not understand the point you are making. Consumers in the EU pay the same VAT on products from the EU as from products from the US. There is no unfairness. Businesses in the EU do not have to pay VAT, whether from the EU or from US. The only "additional tax burden" that US companies face are US internal taxes.
- firesteelrain 2y ago
  You are technically correct however your comment overlooks the structural disadvantages that US businesses face due to lack of VAT. VATs are pass thru to the consumer as other comments on here have indicated. There is no inherent discrimination between US and EU products in terms of VAT rate. It’s neutral within the country. A US company selling to the EU still has to factor in US corporate taxes in its pricing and does not get a VAT rebate. And due to structural disadvantages, US does not have a VAT to refund like EU countries when they export. EU countries can price their goods more competitively. Given those facts, Trump views VAT as a hidden tariff that puts the US at a disadvantage.
  - Muromec 2y ago
    >EU countries can price their goods more competitively. Assuming we talk about US consumers -- EU manufacturer is more (?) competitive by not paying VAT on their manufacturing, the same way US companies don't on their domestic production. Where is an advantage exactly? >A US company selling to the EU still has to factor in US corporate taxes in its pricing and does not get a VAT rebate Which VAT rebate they should get if they and their suppliers didn't pay VAT in the first place? They get back 0 USD of the 0% VAT rate in US. Sounds about right.

jimnotgym 2y ago

For a bunch of supposedly smart people there is some really profound misunderstanding of European VAT on this thread. I was going to put it right but I can't be bothered with the pedantic armchair experts. I'm in Finance at a large multinational, and I'm responsible for over $100m of trade in goods across the world. I'm going to state the facts and armchair pedants be damned. My business pays no VAT. I reclaim all import VAT and any other purchase VAT. I can't reclaim import duties (tariffs). Therefore VAT is not a tariff. The end.

daft_pink 2y ago

I don’t think the intention is for it to be a discriminatory tax, but the end result is that it is.

talldayo 2y ago
America could draft new agreements, or failing that join the EU even. But apparently Americans are on their isolationism kick so I don't think they're coming to the table with much leverage that Europeans want. Plus, the way America fights against common-sense regulation absolutely deserves discrimination abroad. I say that as a taxpaying American too - bring our businesses to heel or have them removed from Europe entirely.

grumblingdev 2y ago

If people are willing to buy my product for $100 at most, I will earn $83 pre VAT (20%). If my product costs $73 to make, then I make $10 profit, and the government earns $17. The government then spends this $17 to the benefit of the citizens of that country. The tax burden either falls on the producer or the consumer depending on price elasticity of demand. High elasticity would result in the producer needing to absorb the VAT. But high elasticity for individual products usually results from increased competition. But if there is not much competition, and elasticity is still high, then the company's profit margins are being eroded by the tax, with a greater share going to the government. If the average price elasticity of demand for imports is higher than domestic production, then one could argue this is not fair. Also, each EU country has certain discretion over how to charge VAT for groups of products so there is the potential for unfairness and tariff like impacts. But I will admit that it is a difficult case to make that a consumption tax is discriminatory.

MoonShot7 2y ago

There are also different rates from different countries, so applying a 25% retaliatory tariff is questionable. Even in the UK, they have different rates (5% - 20%): https://www.vatcalculators.co.uk/ https://www.vatcalculators.co.uk/