4 ms·

You are misunderstanding. Both VAT and sales tax are only paid by the end consumer. The main difference is that VAT is progressively collected at each productio

You are misunderstanding. Both VAT and sales tax are only paid by the end consumer. The main difference is that VAT is progressively collected at each production step whereas sales tax is only collected during the final transaction to the end consumer. If a good is exported, no VAT nor sales tax is due in the export country. But because some VAT has already been collected in the earlier production stages, that VAT needs to be returned to the exporter. No sales tax will have been collected at the time a good is exported, hence there is none to return. In both cases, the end result is that no VAT or sales tax is paid in the export country. Hence the situation is completely the same. Corporate taxes are orthogonal to this discussion. Both US and EU have them and they apply to corporate profits, independently on if they derive from exports or domestic sales. So no reason to complicate the discussion by bringing them up.

firesteelrain 2y ago
I feel like I keep repeating myself You got some things right VAT countries can export tax-free because VAT is refunded Even though VAT itself is not a tariff, its refund system effectively subsidizes exports by removing domestic tax costs You are missing the trade impact of VAT refunds though It is a fact that US goods tend to be more expensive in VAT countries like the EU because they face an extra tax burden upon import that EU goods do not face when exported to the US. This extra burden is the VAT that the consumer now has to pay. Whereas when it’s exported to the US, the US consumer does not have to pay the VAT so the trade playing field is not equal. That’s why Trump sees VAT as a “hidden tariff.” Even though VAT is not a tariff, it functions like one by favoring VAT-based exports
- alexanderchr 2y ago
  Yes, you are indeed repeating yourself. Unfortunately, that does not make what you are saying more right. VAT countries export VAT free. Sales tax countries export sales tax free. When you import something to a VAT country, the end consumer has to pay VAT. When you import something to a sales tax country, the end consumer has to pay sales tax. Maybe we can make some progress if you could explain how these situations are not completely analogous, and what precisely is it that gives VAT countries an unfair advantage?

firesteelrain 2y ago

I feel like I keep repeating myself You got some things right VAT countries can export tax-free because VAT is refunded Even though VAT itself is not a tariff, its refund system effectively subsidizes exports by removing domestic tax costs You are missing the trade impact of VAT refunds though It is a fact that US goods tend to be more expensive in VAT countries like the EU because they face an extra tax burden upon import that EU goods do not face when exported to the US. This extra burden is the VAT that the consumer now has to pay. Whereas when it’s exported to the US, the US consumer does not have to pay the VAT so the trade playing field is not equal. That’s why Trump sees VAT as a “hidden tariff.” Even though VAT is not a tariff, it functions like one by favoring VAT-based exports

alexanderchr 2y ago
Yes, you are indeed repeating yourself. Unfortunately, that does not make what you are saying more right. VAT countries export VAT free. Sales tax countries export sales tax free. When you import something to a VAT country, the end consumer has to pay VAT. When you import something to a sales tax country, the end consumer has to pay sales tax. Maybe we can make some progress if you could explain how these situations are not completely analogous, and what precisely is it that gives VAT countries an unfair advantage?