7 ms·

How did the value added tax (which is paid by all companies including domestic ones) become the same as import duty? The only way that you can make that tariff

by chvid 2y ago

How did the value added tax (which is paid by all companies including domestic ones) become the same as import duty? The only way that you can make that tariffs charged to the USA is the level Trump claims (ie. 39% in the EU) is if you include VAT.

qwertox 2y ago
Some of the workers won't understand that EU companies also have to pay the same VAT in the EU, so they think it's correct reasoning.
mytailorisrich 2y ago
VAT is not paid by companies. It is paid by consumers and collected by companies. The US have the sales tax, which is similar. It absolutely does not make sense to count VAT as a "tariff". I am sure they know it.
- butterknife 2y ago
  My company pays VAT surplus to government every quarter since the VAT we collect on our products and services is higher then the VAT we pay for our purchases. How are we not paying it?
  - mytailorisrich 2y ago
    You are answering your own question: companies collect VAT from consumers and pass it on to tax authorities. Then, as the company is VAT-registered what it purchases is either VAT-free or VAT paid can be deducted from the amount of VAT collected from consumers (as you said). Bottom line: companies do not pay VAT on their own purchases, they only pass on VAT collected from consumers. Obviously companies do make actual payments to the tax authorities but the point is that these are not from their own funds, they only effectively act as tax collectors.
    - butterknife 2y ago
      You are right I suppose. We pay it and then we can get some of it returned.
      - bildung 2y ago
        You get all of it returned. 100% of the VAT you paid on things you as a company bought you'll get back from the tax office. And when selling products, you'll send 100% of the VAT collected from consumers to the tax office. VAT doesn't affect a company (besides the bookkeeping).
        SJC_Hacker 2y ago
        If thats the case, why not just register a business, and make a bunch of purchases so you don't have to pay VAT?
        bildung 2y ago
        Because that would be an obvious loophole and has been made illegal almost everywhere (i.e. you can't have a business that isn't aiming for profitability).
  - teemur 2y ago
    "Paying" is a bit too ambiguous term. Let's say we go to have a lunch, but I forgot my wallet at the office. You pay my lunch and once we are back at the office, I pay you back. Who paid my lunch, you or me? Your company pays VAT in the technical sense you paid my lunch and your company does not pay VAT in the economical sense I paid my lunch.
- arlort 2y ago
  No, VAT is actually paid by companies (and also consumers of course), it's one of the subtle differences between VAT and sales tax. The "thought experiment" you can make is the case of something not ending up being sold. In a VAT regime the manufacturer will have already paid the VAT on the inputs but since the customer hasn't paid the VAT on the finished product the manufacturer won't get their money back on the VAT they already paid (there might be other tax rebates or write offs, but that's a different matter) In a sales tax regime the tax is only paid by the final consumer so if the manufacturer doesn't sell the product they are not out for any additional tax Still doesn't change that neither of those are a tariff by any definition
  - mytailorisrich 2y ago
    A VAT-registered company is either able to purchase VAT-free or is refunded the amount of VAT it pays (by offsetting against the VAT it has collected, up to getting actual refunds). Effectively VAT is only paid by consumers. NB: in you example if the company has paid more VAT than it has collected in the period then it gets an actual refund.
    - arlort 2y ago
      > Effectively VAT is only paid by consumers. Yes, absolutely, in 99% of cases that is true. But conceptually there is a difference. > NB: in you example if the company has paid more VAT than it has collected in the period then it gets and actual refund. Yes, which is what I said as well. But the refund in itself is an additional step on top of the tax system and the money does get paid by the company in the first place. There is indeed a difference in how the cash flow of a company looks like. That's the entire point of VAT, to make tax evasion harder by making everyone pay at every step and figuring out later the refunds This is not a criticism of VAT or anything else by the way, as I said, in 99% of cases the company will get the VAT fully refunded and not pay anything on net over the fiscal year
  - jbverschoor 2y ago
    VAT = Value Added Tax. Tax should be paid whenever there was value added to a product/service, and it was sold. The manufacturer has paid VAT, and will get back the paid VAT from the tax authorities. It then adds value (value added tax). It has to charge VAT of the full amount. So, the company in the chain pays VAT over the profit of that product/service. For example (assume 20% VAT): Company 1 creates something with 0 cost, and sells for 100. Needs to add VAT (20) and pay that to the tax authority. 20 has been collected. Company 2 buys it for the 120, packages and labels it, then sells it for 180 but needs to add 36 VAT. The company will file a tax return of 20-36, so will effectively have to pay 16 to the tax authority. Another 16 has been collected. Consumer buys it for 216 and doesn't get any VAT back. Effectively, 20 + 16 = 36 VAT has been collected over time. The tax return can only be done by companies with a VAT registration. In some cases the VAT burden can be inverted in b2b transactions and within the EU. This is there so companies don't have to do cross-border tax returns.
- deleted 2y ago
  [deleted]
vdupras 2y ago
Maybe that applying VAT to imports is done asymmetrically? If, for example, I'm a US citizen importing a european widget, will federal and state sales tax be applied on import? If they're not, then this might be why they're considered thus.
- cmurf 2y ago
  Uhh... Whether you're a citizen isn't a factor. There's no federal sales tax, although these tariffs act as an import tax that will increase the wholesale costs. And state sales taxes don't apply to imports or wholesale transactions, they are retail tax (or also often a use tax if a sales tax wasn't previously imposed). VAT is not only a retail sales tax, it'll apply anytime the widget is somehow modified (value is added).
- throw310822 2y ago
  Not really, because the point of tariffs is that they apply only to imported goods, creating a preference for local ones. If VAT is applied equally to imported and local goods it's not a tariff, it's a tax that consumers pay in any case.
oramit 2y ago
People keep making the mistake of thinking that there is any sort of logical consistency to Trump policies.
- bitmasher9 2y ago
  People keep making the mistake of thinking there is no logical consistency to Trump policies. He has an agenda.
  - Cpoll 2y ago
    What is that agenda?
    - g-b-r 2y ago
      To have as much fun as he can in his final years. He's most entertained by messing up anything good he runs into.
      - prawn 2y ago
        I know he's a very different person with very different interests, but I can think of little worse than spending ANY years having to put on a suit and makeup every single day.
        mrguyorama 2y ago
        What if instead of "a suit and makeup", you consider it what it actually is? A clown costume.
    - goatlover 2y ago
      To go down in history as this great figure who increased American territory and the power of the executive branch while making America this economic giant that doesn't depend on the global economy, because he thinks economic policies still work like they did in the 19th century.
  - 2y ago
zerocrates 2y ago
He has talked about VAT, but in terms of how they ended up with those numbers, people noticed that the claimed rates don't have anything to do with the actual tariff/VAT/etc. rates, they're just based on the relative size of the US trade deficit with each country. The gloss will be "this way captures all the various unfair things they're doing to us that are the cause of all these trade deficits" but that's just, well, gloss.
0xy 2y ago
Not if you include trade barriers like the DMA, a law which is used to milk US technology companies through vague court rulings with arbitrary fines. The EU is the undisputed king of vague laws that are applied principally to competitors with arbitrary fines. How do you implement GDPR? Don't ask us, but if you violate it watch out! How do you comply with DMA? Don't ask us, but if you violate it watch out!

by chvid 2y ago

qwertox 2y ago

Some of the workers won't understand that EU companies also have to pay the same VAT in the EU, so they think it's correct reasoning.

mytailorisrich 2y ago

VAT is not paid by companies. It is paid by consumers and collected by companies. The US have the sales tax, which is similar. It absolutely does not make sense to count VAT as a "tariff". I am sure they know it.

butterknife 2y ago
My company pays VAT surplus to government every quarter since the VAT we collect on our products and services is higher then the VAT we pay for our purchases. How are we not paying it?
- mytailorisrich 2y ago
  You are answering your own question: companies collect VAT from consumers and pass it on to tax authorities. Then, as the company is VAT-registered what it purchases is either VAT-free or VAT paid can be deducted from the amount of VAT collected from consumers (as you said). Bottom line: companies do not pay VAT on their own purchases, they only pass on VAT collected from consumers. Obviously companies do make actual payments to the tax authorities but the point is that these are not from their own funds, they only effectively act as tax collectors.
  - butterknife 2y ago
    You are right I suppose. We pay it and then we can get some of it returned.
    - bildung 2y ago
      You get all of it returned. 100% of the VAT you paid on things you as a company bought you'll get back from the tax office. And when selling products, you'll send 100% of the VAT collected from consumers to the tax office. VAT doesn't affect a company (besides the bookkeeping).
      - SJC_Hacker 2y ago
        If thats the case, why not just register a business, and make a bunch of purchases so you don't have to pay VAT?
        bildung 2y ago
        Because that would be an obvious loophole and has been made illegal almost everywhere (i.e. you can't have a business that isn't aiming for profitability).
- teemur 2y ago
  "Paying" is a bit too ambiguous term. Let's say we go to have a lunch, but I forgot my wallet at the office. You pay my lunch and once we are back at the office, I pay you back. Who paid my lunch, you or me? Your company pays VAT in the technical sense you paid my lunch and your company does not pay VAT in the economical sense I paid my lunch.
arlort 2y ago
No, VAT is actually paid by companies (and also consumers of course), it's one of the subtle differences between VAT and sales tax. The "thought experiment" you can make is the case of something not ending up being sold. In a VAT regime the manufacturer will have already paid the VAT on the inputs but since the customer hasn't paid the VAT on the finished product the manufacturer won't get their money back on the VAT they already paid (there might be other tax rebates or write offs, but that's a different matter) In a sales tax regime the tax is only paid by the final consumer so if the manufacturer doesn't sell the product they are not out for any additional tax Still doesn't change that neither of those are a tariff by any definition
- mytailorisrich 2y ago
  A VAT-registered company is either able to purchase VAT-free or is refunded the amount of VAT it pays (by offsetting against the VAT it has collected, up to getting actual refunds). Effectively VAT is only paid by consumers. NB: in you example if the company has paid more VAT than it has collected in the period then it gets an actual refund.
  - arlort 2y ago
    > Effectively VAT is only paid by consumers. Yes, absolutely, in 99% of cases that is true. But conceptually there is a difference. > NB: in you example if the company has paid more VAT than it has collected in the period then it gets and actual refund. Yes, which is what I said as well. But the refund in itself is an additional step on top of the tax system and the money does get paid by the company in the first place. There is indeed a difference in how the cash flow of a company looks like. That's the entire point of VAT, to make tax evasion harder by making everyone pay at every step and figuring out later the refunds This is not a criticism of VAT or anything else by the way, as I said, in 99% of cases the company will get the VAT fully refunded and not pay anything on net over the fiscal year
- jbverschoor 2y ago
  VAT = Value Added Tax. Tax should be paid whenever there was value added to a product/service, and it was sold. The manufacturer has paid VAT, and will get back the paid VAT from the tax authorities. It then adds value (value added tax). It has to charge VAT of the full amount. So, the company in the chain pays VAT over the profit of that product/service. For example (assume 20% VAT): Company 1 creates something with 0 cost, and sells for 100. Needs to add VAT (20) and pay that to the tax authority. 20 has been collected. Company 2 buys it for the 120, packages and labels it, then sells it for 180 but needs to add 36 VAT. The company will file a tax return of 20-36, so will effectively have to pay 16 to the tax authority. Another 16 has been collected. Consumer buys it for 216 and doesn't get any VAT back. Effectively, 20 + 16 = 36 VAT has been collected over time. The tax return can only be done by companies with a VAT registration. In some cases the VAT burden can be inverted in b2b transactions and within the EU. This is there so companies don't have to do cross-border tax returns.
deleted 2y ago
[deleted]

vdupras 2y ago

Maybe that applying VAT to imports is done asymmetrically? If, for example, I'm a US citizen importing a european widget, will federal and state sales tax be applied on import? If they're not, then this might be why they're considered thus.

cmurf 2y ago
Uhh... Whether you're a citizen isn't a factor. There's no federal sales tax, although these tariffs act as an import tax that will increase the wholesale costs. And state sales taxes don't apply to imports or wholesale transactions, they are retail tax (or also often a use tax if a sales tax wasn't previously imposed). VAT is not only a retail sales tax, it'll apply anytime the widget is somehow modified (value is added).
throw310822 2y ago
Not really, because the point of tariffs is that they apply only to imported goods, creating a preference for local ones. If VAT is applied equally to imported and local goods it's not a tariff, it's a tax that consumers pay in any case.

oramit 2y ago

People keep making the mistake of thinking that there is any sort of logical consistency to Trump policies.

bitmasher9 2y ago
People keep making the mistake of thinking there is no logical consistency to Trump policies. He has an agenda.
- Cpoll 2y ago
  What is that agenda?
  - g-b-r 2y ago
    To have as much fun as he can in his final years. He's most entertained by messing up anything good he runs into.
    - prawn 2y ago
      I know he's a very different person with very different interests, but I can think of little worse than spending ANY years having to put on a suit and makeup every single day.
      - mrguyorama 2y ago
        What if instead of "a suit and makeup", you consider it what it actually is? A clown costume.
  - goatlover 2y ago
    To go down in history as this great figure who increased American territory and the power of the executive branch while making America this economic giant that doesn't depend on the global economy, because he thinks economic policies still work like they did in the 19th century.
- 2y ago

zerocrates 2y ago

He has talked about VAT, but in terms of how they ended up with those numbers, people noticed that the claimed rates don't have anything to do with the actual tariff/VAT/etc. rates, they're just based on the relative size of the US trade deficit with each country. The gloss will be "this way captures all the various unfair things they're doing to us that are the cause of all these trade deficits" but that's just, well, gloss.

0xy 2y ago

Not if you include trade barriers like the DMA, a law which is used to milk US technology companies through vague court rulings with arbitrary fines. The EU is the undisputed king of vague laws that are applied principally to competitors with arbitrary fines. How do you implement GDPR? Don't ask us, but if you violate it watch out! How do you comply with DMA? Don't ask us, but if you violate it watch out!