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Caterpillar's bulldozer is $55,000 more expensive in Germany than Liebherr’s. Liebherr benefits from tax neutrality (VAT applies equally), while Caterpillar fac

Caterpillar's bulldozer is $55,000 more expensive in Germany than Liebherr’s. Liebherr benefits from tax neutrality (VAT applies equally), while Caterpillar faces a 19% VAT on import. This confirms that VAT-based countries create a "home-field advantage" by making foreign imports more expensive through VAT, while domestic goods are not taxed differently.

mopsi 2y ago
Please break down how a 200k Caterpillar becomes 55k more expensive for a German buyer compared to a 200k Liebherr manufactured in Germany. The US government does not charge consumption taxes on a Caterpillar exported to Germany, so both are priced at 200k before taxation in Germany. The German government charges its 19% consumption tax equally, regardless of where a bulldozer was made, so both end up costing 238k for the German buyer.
- firesteelrain 2y ago
  Liebherr’s bulldozer is priced at €500,000 (~$540,000 USD equivalent) in Germany. Total price paid by the U.S. consumer is $485,545 due to VAT refund. Caterpillar’s bulldozer is 22.5% more expensive in Germany than in the US. There is approximately a $109,455 price advantage for the German company in global competition
  - mopsi 2y ago
    > Caterpillar’s bulldozer is 22.5% more expensive in Germany than in the US. Liebherr's bulldozer is also more expensive in Germany, because Germany taxes both sales at a higher rate than the US. Nobody gets an advantage from this. American buyer pays 7% tax and German buyer pays 19% when they purchase a bulldozer, regardless of where it came from. I made a small table to illustrate it: +-----------+------------+-----------+----------------+------------+ | Direction | Base Price | VAT (19%) | Sales Tax (7%) | Total | +-----------+------------+-----------+----------------+------------+ | US -> US | 200 000 | - | 14 000 | 214 000 | | G -> US | 200 000 | - | 14 000 | 214 000 | | G -> G | 200 000 | 38 000 | - | 238 000 | | US -> G | 200 000 | 38 000 | - | 238 000 | +-----------+------------+-----------+----------------+------------+ Tax rate differences lead to price variations across markets, but VAT does not create advantages within a single market.
    - firesteelrain 2y ago
      It does for European exporters. Sadly if this was Biden this wouldn’t even be an argument.

mopsi 2y ago

Please break down how a 200k Caterpillar becomes 55k more expensive for a German buyer compared to a 200k Liebherr manufactured in Germany. The US government does not charge consumption taxes on a Caterpillar exported to Germany, so both are priced at 200k before taxation in Germany. The German government charges its 19% consumption tax equally, regardless of where a bulldozer was made, so both end up costing 238k for the German buyer.

firesteelrain 2y ago
Liebherr’s bulldozer is priced at €500,000 (~$540,000 USD equivalent) in Germany. Total price paid by the U.S. consumer is $485,545 due to VAT refund. Caterpillar’s bulldozer is 22.5% more expensive in Germany than in the US. There is approximately a $109,455 price advantage for the German company in global competition
- mopsi 2y ago
  > Caterpillar’s bulldozer is 22.5% more expensive in Germany than in the US. Liebherr's bulldozer is also more expensive in Germany, because Germany taxes both sales at a higher rate than the US. Nobody gets an advantage from this. American buyer pays 7% tax and German buyer pays 19% when they purchase a bulldozer, regardless of where it came from. I made a small table to illustrate it: +-----------+------------+-----------+----------------+------------+ | Direction | Base Price | VAT (19%) | Sales Tax (7%) | Total | +-----------+------------+-----------+----------------+------------+ | US -> US | 200 000 | - | 14 000 | 214 000 | | G -> US | 200 000 | - | 14 000 | 214 000 | | G -> G | 200 000 | 38 000 | - | 238 000 | | US -> G | 200 000 | 38 000 | - | 238 000 | +-----------+------------+-----------+----------------+------------+ Tax rate differences lead to price variations across markets, but VAT does not create advantages within a single market.
  - firesteelrain 2y ago
    It does for European exporters. Sadly if this was Biden this wouldn’t even be an argument.