6 ms·

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. Ther

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.
  - firesteelrain 2y ago
    There is a structural disadvantage. You are correct that both the US and EU do not pay VAT when exporting. EU countries get full VAT rebate when exporting. But, the US primarily taxes businesses via corporate income tax (~21% federally, plus state taxes). EU follows a VAT system which is refunded on export. Corporations don’t get refunds on exports of their own countries prescribed tax. EU companies can structure their pricing differently since it is leaving the EU without a tax burden. EU exports tax free. On your other questions, I think you are missing the bigger picture. The part you are missing is that EU exporters get a tax refund. The rebate the US is missing is an equivalent tax relief system. VAT-based economies remove tax burdens for exporters and keep them for importers. To be clear, the EU is not “cheating”. Trump just sees the entire system resulting in a trade imbalance and the only mechanism he has right now is tariffs without overhauling the entire US tax code or some other similar relief system. There are other options that could be implemented like this and the one chosen was the tariff.
    - Muromec 2y ago
      >On your other questions, I think you are missing the bigger picture. The part you are missing is that EU exporters get a tax refund. I'm not missing it, you are missing it. Yes EU companies get a tax refund and US companies don't, because there is nothing to refund when nothing was paid. >But, the US primarily taxes businesses via corporate income tax (~21% federally, plus state taxes) Believe it or not, but corporate income taxes in Europe also exist. I can see the argument that tax burden for companies in US is higher because government collects more in income tax and less in VAT tax. I'm not sure that is actually true and strongly suspect it's not, as EU is anything but a low-tax jurisdiction. If anything, that's a good argument for US to introduce VAT tax.
      - firesteelrain 2y ago
        You are correct that US exporters don’t get a VAT refund because they don’t pay VAT and corporate tax exists in both systems. But US exporters still face a tax burden that EU exporters do not. Introducing the VAT would fix this particular issue but it doesn’t fix everything. Trump isn’t wrong that the EU system is giving an edge to their exporters. In the US, VAT has been seen as regressive and hurts lower income consumers more. Changing to VAT would be politically difficult and those major changes to the US tax code have been resisted by Congress. US could offer credits on exports to act sort of like the VAT system. I am not sure what kind of impact that would have. That tax would still have to be collected elsewhere. Or corporate taxes could be reduced on exports.
        Muromec 2y ago
        > But US exporters still face a tax burden that EU exporters do not. What exports (to where) we are talking about and what is this burden? I don't exactly follow your argument here.
        firesteelrain 2y ago
        Any US goods exported to a VAT country (e.g Germany, France, Italy, Japan, etc) and the industries affected are automotive, manufacturing, agriculture, technology, pharmaceuticals, etc. All of them Some examples A Ford car exported from the US to Germany must be priced after paying US corporate tax (21% federal + state taxes) A BMW exported from Germany to the US gets a full VAT refund (~19% in Germany), making it tax-free on export US does not refund taxes on exports, but the EU does My final points are that EU exporters sell their products abroad with no tax burden due to VAT refunds and US exporters must price in US corporate taxes Final example Boeing (US) exports planes priced after US corporate tax (~21%) Airbus (EU) exports planes after receiving a VAT refund (~20%), making their planes cheaper in global markets This is why Trump and others see VAT as a “hidden tariff”
- milesrout 2y ago
  EU countries cannot price their goods more competitively. EU businesses aren't charged VAT by the EU on goods they export because consumers pay VAT. But when they export goods to another country, tax is still paid. It is just paid by the consumer in that country, including the US. For example, if an EU business exports to NZ then they have to remit 15% GST on the goods to the NZ tax authorities. The same is true of Australia or the US or any other destination with sales tax. The US has relatively low sales taxes, so its consumers have an advantage when importing over consumers in other countries. That is a good thing for US consumers: they pay less for goods. It has nothing to do with US exporters. The US doesn't refund VAT to exporters because there is nothing to refund: they don't pay VAT on their inputs. The refund is fiscally neutral for businesses. The EU exporters that get VAT refunds aren't netting anything. They are just getting back tax they paid but never owed. US exporters don't pay any sales taxes on their inputs so they don't need refunds: they kept their money in the first place. EU countries also pay income tax. In no possible sense are EU companies advantaged by the EU being a generally higher-tax place than the US. The opposite is true: if VAT were lower, they would be more competitive domestically and would have be better resourced to invest in their processes and become more efficient and competitive.
  - firesteelrain 2y ago
    Without going line by line, I will say that you make all valid points and are correct. But you are ignoring key trade competitiveness issues due to the way VAT and US tax system is structured. EU system incentivizes trade exports by making sure they leave the country tax free. US does not. The disadvantage is not the VAT itself but lack of equivalent tax relief. The real fix is to tax policy but Trump’s only way to fix it right now is via executive action using tariffs. It’s sort of a blunt instrument but it can be effective for what he is trying to achieve.
- layer8 2y ago
  You might as well argue that it’s the US tax system that puts the US at a disadvantage regarding exports. Similarly, the relative lack of worker rights in the US could be argued to put US producers at an advantage. This is economies competing against each other, but the VAT is applied equally to EU and foreign producers, so it seems really odd to blame the very factor that is actually neutral here.
  - firesteelrain 2y ago
    I am arguing that the US tax system puts them at a disadvantage and the option that Trump has available to him without Congress fixing the perceived trade imbalance is executive action through tariff.
- jsnell 2y ago
  > A US company selling to the EU still has to factor in US corporate taxes in its pricing A EU company selling to the EU also has to factor in their local corporate taxes. There's no structural difference there. (There are EU countries where corporate taxes are higher than the US and ones where they're lower). > and does not get a VAT rebate. They only get no VAT rebate because they paid no VAT. There is no structural advantage or disadvantage here: neither the EU or US producer paid any net VAT. > Given those facts, Trump views VAT as a hidden tariff that puts the US at a disadvantage. Given that those "facts" are demonstrably untrue, would you agree that the "hidden tariff" narrative is actually untrue?
  - firesteelrain 2y ago
    I believe you are misunderstanding the core trade issue by focusing too narrowly on VAT as a tax rather than the overall tax structure difference between the US and VAT-based economies. US companies must factor in corporate tax and foreign VAT when selling to VAT countries. A example is a German car manufacturer exporting to the US gets a full VAT refund and only has to price based on cost + profit. For VAT countries, the export price is lower because it does not need to factor in corporate taxes like the US companies do. Finally, to your last point. Trump is not completely wrong just people are oversimplifying. His use of calling a hidden tariff is not technically correct but it is a trade barrier. Trump’s current use of tariffs is not the best fix but he is still right on the trade imbalance. VAT is not a tariff, but its effect on trade functions like one when compared to the Us tax system.
    - jsnell 2y ago
      > A example is a German car manufacturer exporting to the US gets a full VAT refund and only has to price based on cost + profit. > For VAT countries, the export price is lower because it does not need to factor in corporate taxes like the US companies do. This is just totally untrue. A German car company will pay German corporate taxes on their profits, no matter whether the cars that produced those profits were sold domestically, exported to other EU countries, or exported to the US.

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.
- firesteelrain 2y ago
  There is a structural disadvantage. You are correct that both the US and EU do not pay VAT when exporting. EU countries get full VAT rebate when exporting. But, the US primarily taxes businesses via corporate income tax (~21% federally, plus state taxes). EU follows a VAT system which is refunded on export. Corporations don’t get refunds on exports of their own countries prescribed tax. EU companies can structure their pricing differently since it is leaving the EU without a tax burden. EU exports tax free. On your other questions, I think you are missing the bigger picture. The part you are missing is that EU exporters get a tax refund. The rebate the US is missing is an equivalent tax relief system. VAT-based economies remove tax burdens for exporters and keep them for importers. To be clear, the EU is not “cheating”. Trump just sees the entire system resulting in a trade imbalance and the only mechanism he has right now is tariffs without overhauling the entire US tax code or some other similar relief system. There are other options that could be implemented like this and the one chosen was the tariff.
  - Muromec 2y ago
    >On your other questions, I think you are missing the bigger picture. The part you are missing is that EU exporters get a tax refund. I'm not missing it, you are missing it. Yes EU companies get a tax refund and US companies don't, because there is nothing to refund when nothing was paid. >But, the US primarily taxes businesses via corporate income tax (~21% federally, plus state taxes) Believe it or not, but corporate income taxes in Europe also exist. I can see the argument that tax burden for companies in US is higher because government collects more in income tax and less in VAT tax. I'm not sure that is actually true and strongly suspect it's not, as EU is anything but a low-tax jurisdiction. If anything, that's a good argument for US to introduce VAT tax.
    - firesteelrain 2y ago
      You are correct that US exporters don’t get a VAT refund because they don’t pay VAT and corporate tax exists in both systems. But US exporters still face a tax burden that EU exporters do not. Introducing the VAT would fix this particular issue but it doesn’t fix everything. Trump isn’t wrong that the EU system is giving an edge to their exporters. In the US, VAT has been seen as regressive and hurts lower income consumers more. Changing to VAT would be politically difficult and those major changes to the US tax code have been resisted by Congress. US could offer credits on exports to act sort of like the VAT system. I am not sure what kind of impact that would have. That tax would still have to be collected elsewhere. Or corporate taxes could be reduced on exports.
      - Muromec 2y ago
        > But US exporters still face a tax burden that EU exporters do not. What exports (to where) we are talking about and what is this burden? I don't exactly follow your argument here.
        firesteelrain 2y ago
        Any US goods exported to a VAT country (e.g Germany, France, Italy, Japan, etc) and the industries affected are automotive, manufacturing, agriculture, technology, pharmaceuticals, etc. All of them Some examples A Ford car exported from the US to Germany must be priced after paying US corporate tax (21% federal + state taxes) A BMW exported from Germany to the US gets a full VAT refund (~19% in Germany), making it tax-free on export US does not refund taxes on exports, but the EU does My final points are that EU exporters sell their products abroad with no tax burden due to VAT refunds and US exporters must price in US corporate taxes Final example Boeing (US) exports planes priced after US corporate tax (~21%) Airbus (EU) exports planes after receiving a VAT refund (~20%), making their planes cheaper in global markets This is why Trump and others see VAT as a “hidden tariff”
milesrout 2y ago
EU countries cannot price their goods more competitively. EU businesses aren't charged VAT by the EU on goods they export because consumers pay VAT. But when they export goods to another country, tax is still paid. It is just paid by the consumer in that country, including the US. For example, if an EU business exports to NZ then they have to remit 15% GST on the goods to the NZ tax authorities. The same is true of Australia or the US or any other destination with sales tax. The US has relatively low sales taxes, so its consumers have an advantage when importing over consumers in other countries. That is a good thing for US consumers: they pay less for goods. It has nothing to do with US exporters. The US doesn't refund VAT to exporters because there is nothing to refund: they don't pay VAT on their inputs. The refund is fiscally neutral for businesses. The EU exporters that get VAT refunds aren't netting anything. They are just getting back tax they paid but never owed. US exporters don't pay any sales taxes on their inputs so they don't need refunds: they kept their money in the first place. EU countries also pay income tax. In no possible sense are EU companies advantaged by the EU being a generally higher-tax place than the US. The opposite is true: if VAT were lower, they would be more competitive domestically and would have be better resourced to invest in their processes and become more efficient and competitive.
- firesteelrain 2y ago
  Without going line by line, I will say that you make all valid points and are correct. But you are ignoring key trade competitiveness issues due to the way VAT and US tax system is structured. EU system incentivizes trade exports by making sure they leave the country tax free. US does not. The disadvantage is not the VAT itself but lack of equivalent tax relief. The real fix is to tax policy but Trump’s only way to fix it right now is via executive action using tariffs. It’s sort of a blunt instrument but it can be effective for what he is trying to achieve.
layer8 2y ago
You might as well argue that it’s the US tax system that puts the US at a disadvantage regarding exports. Similarly, the relative lack of worker rights in the US could be argued to put US producers at an advantage. This is economies competing against each other, but the VAT is applied equally to EU and foreign producers, so it seems really odd to blame the very factor that is actually neutral here.
- firesteelrain 2y ago
  I am arguing that the US tax system puts them at a disadvantage and the option that Trump has available to him without Congress fixing the perceived trade imbalance is executive action through tariff.
jsnell 2y ago
> A US company selling to the EU still has to factor in US corporate taxes in its pricing A EU company selling to the EU also has to factor in their local corporate taxes. There's no structural difference there. (There are EU countries where corporate taxes are higher than the US and ones where they're lower). > and does not get a VAT rebate. They only get no VAT rebate because they paid no VAT. There is no structural advantage or disadvantage here: neither the EU or US producer paid any net VAT. > Given those facts, Trump views VAT as a hidden tariff that puts the US at a disadvantage. Given that those "facts" are demonstrably untrue, would you agree that the "hidden tariff" narrative is actually untrue?
- firesteelrain 2y ago
  I believe you are misunderstanding the core trade issue by focusing too narrowly on VAT as a tax rather than the overall tax structure difference between the US and VAT-based economies. US companies must factor in corporate tax and foreign VAT when selling to VAT countries. A example is a German car manufacturer exporting to the US gets a full VAT refund and only has to price based on cost + profit. For VAT countries, the export price is lower because it does not need to factor in corporate taxes like the US companies do. Finally, to your last point. Trump is not completely wrong just people are oversimplifying. His use of calling a hidden tariff is not technically correct but it is a trade barrier. Trump’s current use of tariffs is not the best fix but he is still right on the trade imbalance. VAT is not a tariff, but its effect on trade functions like one when compared to the Us tax system.
  - jsnell 2y ago
    > A example is a German car manufacturer exporting to the US gets a full VAT refund and only has to price based on cost + profit. > For VAT countries, the export price is lower because it does not need to factor in corporate taxes like the US companies do. This is just totally untrue. A German car company will pay German corporate taxes on their profits, no matter whether the cars that produced those profits were sold domestically, exported to other EU countries, or exported to the US.