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Happy to see some progress here, I trust you will stop bringing up corporate taxes as a distorting element. Next up, what you need to understand is that there'

by jsnell 2y ago

Happy to see some progress here, I trust you will stop bringing up corporate taxes as a distorting element. Next up, what you need to understand is that there's no tax relief happening here either. When the end consumer is in the US, nobody pays any VAT on anything in the value chain. Not the US company, not the EU company. And conversely when selling to the EU, exactly the same amount of VAT is paid in the end, no matter how the value chain is distributed among different jurisdictions. Where's the unfair asymmetry here? VAT is a consumption tax. It's conceptually paid by the end consumer. It's not paid for goods exported to a non-VAT country because it's up to the destination country to decide how they want to tax consumption, not the source country.

firesteelrain 2y ago
I have explained this across multiple threads for multiple people. To put it simply, VAT-based countries have a built-in trade advantage because their exported goods leave the country tax-free, while US goods do not get equivalent tax relief when exported. You are right that VAT is a consumption tax and is paid by the consumer in the destination country. However, given the choice, a consumer will typically choose the cheaper option which is often the option that does not carry embedded tax costs from the country of origin. Since VAT refunds remove tax from exports, goods from VAT-based economies often have a competitive price advantage in global markets.
- alexanderchr 2y ago
  VAT returns ensure that exports leave the country VAT free, just like exports from the US leave the country free of sales tax. It is entirely analogous. How do you mean this gives VAT countries an advantage?
  - firesteelrain 2y ago
    This is an answer for your above comment because HN has a timer delay on responding. You have a common argument Because VAT was already collected during production, then VAT refunds remove that embedded tax cost. U.S. sales tax is only applied at final sale. There is no sales tax in production for EU Even though VAT refunds seem analogous to US sales tax exemptions, the key difference is that VAT refunds remove tax burdens from exports in a way that US sales tax exemptions do not
    - Paradigma11 2y ago
      You seem to be implicitly assuming a closed system in which both economies have the same tax burden, economic productivity and efficiency. So, when EU exporters don't pay VAT on exports there must be a cost for the US producer somewhere that he cant write off. Which you haven't shown. You started with corporate tax rate but from my understanding those are pretty similar if being paid at all: "• Over the past three years, Tesla has reported $10.8 billion in U.S. income but paid only $48 million in federal taxes, bringing its effective tax rate to 0.4 percent—far below the 21 percent corporate tax rate." https://www.nationofchange.org/2025/01/31/tesla-paid-zero-federal-income-tax-in-2024-while-gop-pushes-more-corporate-tax-cuts/ https://www.nationofchange.org/2025/01/31/tesla-paid-zero-fe...
      - firesteelrain 2y ago
        You are correct that the overall tax burden, economic productivity, and efficiency are not identical between the US and VAT-based economies like the EU. However, the VAT refund system is what I have been saying is what causes the imbalance along with differing tax structures. This is not a dig against the EU as some people might be thinking I am saying. I am merely explaining the thought process. Devil’s advocate. US is still disadvantaged despite subsidies for EV for like Tesla that were created to encourage clean energy. There is still a system wide US problem. This is despite Tesla receiving subsidies that are far below the 21% corporate tax rate. The tax is still there and then you have VAT that can’t be refunded because the US does not have a VAT system.
        Paradigma11 2y ago
        Average corporate tax in the EU is 21.5%: https://taxfoundation.org/data/all/eu/corporate-income-tax-rates-europe/ https://taxfoundation.org/data/all/eu/corporate-income-tax-r... What are those taxes that you are talking about?
    - alexanderchr 2y ago
      > Even though VAT refunds seem analogous to US sales tax exemptions, the key difference is that VAT refunds remove tax burdens from exports in a way that US sales tax exemptions do not. I’m sorry, I fail to see the difference. In one case the tax is added during production and then returned when the good is exported, and in the other case it is never added at all. In both cases you end up with zero net VAT/sales tax paid. Where exactly does the difference lie?
- jsnell 2y ago
  Yes, you keep making this assertion about "tax relief", but you have yet to provide a concrete example of it. (Other than the ludicrous claims about EU exports being exempt from corporate taxation.)
  - firesteelrain 2y ago
    I don’t know if you can’t read or not but I was responding for hours and included a Ford vs BMW example multiple times. Maybe English is your second language. I will go a little slower for you Here is another one Caterpillar (US) manufactures construction equipment and exports to Germany Liebherr (Germany) manufactures similar construction equipment and exports to the US When producing a bulldozer in Germany, Liebherr pays 19% VAT on all components and services (steel, electronics, labor, etc.). When Liebherr exports the bulldozer to the U.S., Germany fully refunds the 19% VAT. This lowers Liebherr’s export price by 19%. Liebherr sells the bulldozer tax-free in the US. The only tax applied is the US. state/local sales tax (6-10%), which is much lower than 19%. Liebherr bulldozer is now more price-competitive in the US. than Caterpillar’s This is called a trade imbalance
    - jsnell 2y ago
      You spent hours equating US corporate taxes to VAT, not examples that had any connection to reality. When it was pointed out that you were confused, you did not actually engage with those rebuttals, but just copy-pasted the same nonsense again. So I think it's pretty obvious who here can't read. In your new example, Caterpillar pays state/local taxes for their sales to the US, corpirate taxes to the US, and no VAT to the EU. Liebherr pays state/local taxes for their sales to the US, corporate taxes to the EU, and no VAT to the EU. Where is the imbalance? There's no export subsidy here, hidden or otherwise. Everyone is on a level playing field. You could do the same exercise on US exports to EU vs. domestic production in the EU, and it'd likewise show that there are no artifical barriers to imports to the EU > This lowers Liebherr’s export price by 19%. No, it really doesn't. The export price is exactly at the level it would be if there were no VAT at all. > Liebherr sells the bulldozer tax-free in the US. Tax-free other than all the taxes they paid.

by jsnell 2y ago

firesteelrain 2y ago

I have explained this across multiple threads for multiple people. To put it simply, VAT-based countries have a built-in trade advantage because their exported goods leave the country tax-free, while US goods do not get equivalent tax relief when exported. You are right that VAT is a consumption tax and is paid by the consumer in the destination country. However, given the choice, a consumer will typically choose the cheaper option which is often the option that does not carry embedded tax costs from the country of origin. Since VAT refunds remove tax from exports, goods from VAT-based economies often have a competitive price advantage in global markets.

alexanderchr 2y ago
VAT returns ensure that exports leave the country VAT free, just like exports from the US leave the country free of sales tax. It is entirely analogous. How do you mean this gives VAT countries an advantage?
- firesteelrain 2y ago
  This is an answer for your above comment because HN has a timer delay on responding. You have a common argument Because VAT was already collected during production, then VAT refunds remove that embedded tax cost. U.S. sales tax is only applied at final sale. There is no sales tax in production for EU Even though VAT refunds seem analogous to US sales tax exemptions, the key difference is that VAT refunds remove tax burdens from exports in a way that US sales tax exemptions do not
  - Paradigma11 2y ago
    You seem to be implicitly assuming a closed system in which both economies have the same tax burden, economic productivity and efficiency. So, when EU exporters don't pay VAT on exports there must be a cost for the US producer somewhere that he cant write off. Which you haven't shown. You started with corporate tax rate but from my understanding those are pretty similar if being paid at all: "• Over the past three years, Tesla has reported $10.8 billion in U.S. income but paid only $48 million in federal taxes, bringing its effective tax rate to 0.4 percent—far below the 21 percent corporate tax rate." https://www.nationofchange.org/2025/01/31/tesla-paid-zero-federal-income-tax-in-2024-while-gop-pushes-more-corporate-tax-cuts/ https://www.nationofchange.org/2025/01/31/tesla-paid-zero-fe...
    - firesteelrain 2y ago
      You are correct that the overall tax burden, economic productivity, and efficiency are not identical between the US and VAT-based economies like the EU. However, the VAT refund system is what I have been saying is what causes the imbalance along with differing tax structures. This is not a dig against the EU as some people might be thinking I am saying. I am merely explaining the thought process. Devil’s advocate. US is still disadvantaged despite subsidies for EV for like Tesla that were created to encourage clean energy. There is still a system wide US problem. This is despite Tesla receiving subsidies that are far below the 21% corporate tax rate. The tax is still there and then you have VAT that can’t be refunded because the US does not have a VAT system.
      - Paradigma11 2y ago
        Average corporate tax in the EU is 21.5%: https://taxfoundation.org/data/all/eu/corporate-income-tax-rates-europe/ https://taxfoundation.org/data/all/eu/corporate-income-tax-r... What are those taxes that you are talking about?
  - alexanderchr 2y ago
    > Even though VAT refunds seem analogous to US sales tax exemptions, the key difference is that VAT refunds remove tax burdens from exports in a way that US sales tax exemptions do not. I’m sorry, I fail to see the difference. In one case the tax is added during production and then returned when the good is exported, and in the other case it is never added at all. In both cases you end up with zero net VAT/sales tax paid. Where exactly does the difference lie?
jsnell 2y ago
Yes, you keep making this assertion about "tax relief", but you have yet to provide a concrete example of it. (Other than the ludicrous claims about EU exports being exempt from corporate taxation.)
- firesteelrain 2y ago
  I don’t know if you can’t read or not but I was responding for hours and included a Ford vs BMW example multiple times. Maybe English is your second language. I will go a little slower for you Here is another one Caterpillar (US) manufactures construction equipment and exports to Germany Liebherr (Germany) manufactures similar construction equipment and exports to the US When producing a bulldozer in Germany, Liebherr pays 19% VAT on all components and services (steel, electronics, labor, etc.). When Liebherr exports the bulldozer to the U.S., Germany fully refunds the 19% VAT. This lowers Liebherr’s export price by 19%. Liebherr sells the bulldozer tax-free in the US. The only tax applied is the US. state/local sales tax (6-10%), which is much lower than 19%. Liebherr bulldozer is now more price-competitive in the US. than Caterpillar’s This is called a trade imbalance
  - jsnell 2y ago
    You spent hours equating US corporate taxes to VAT, not examples that had any connection to reality. When it was pointed out that you were confused, you did not actually engage with those rebuttals, but just copy-pasted the same nonsense again. So I think it's pretty obvious who here can't read. In your new example, Caterpillar pays state/local taxes for their sales to the US, corpirate taxes to the US, and no VAT to the EU. Liebherr pays state/local taxes for their sales to the US, corporate taxes to the EU, and no VAT to the EU. Where is the imbalance? There's no export subsidy here, hidden or otherwise. Everyone is on a level playing field. You could do the same exercise on US exports to EU vs. domestic production in the EU, and it'd likewise show that there are no artifical barriers to imports to the EU > This lowers Liebherr’s export price by 19%. No, it really doesn't. The export price is exactly at the level it would be if there were no VAT at all. > Liebherr sells the bulldozer tax-free in the US. Tax-free other than all the taxes they paid.