4 ms·

Can someone explain to me why EU VAT is considered a tariff, while US sales taxes are not? They both seem a sale tax to me.

by pokot0 2y ago

pjc50 2y ago
Only people who are wrong consider VAT a tariff. Yes, importers have to pay it, but so do local manufacturers. VAT has basically the same effect as sales taxes with a much more complicated tax incidence.
- freeone3000 2y ago
  At an individual level, it’s not more complicated: it’s reimbursed instead of exempted. And if you’re charging it, it’s easier, since you simply always charge instead of maintaining your list of exceptions.
  - pjc50 2y ago
    UK VAT certainly has a complicated list of exceptions, especially "non-luxury food" (see the Jaffa Cake case https://www.astonshaw.co.uk/jaffa-cake-tax/ https://www.astonshaw.co.uk/jaffa-cake-tax/)
    - freeone3000 2y ago
      But these are per-product, not per-customer. (Businesses, charities, and some customers are exempt from sales tax regardless of what they are buying.)
charamis 2y ago
Really wondering about the same, since VAT is applied to everything too, not only imported products and services.
deleted 2y ago
[deleted]
presto8 2y ago
Because VAT is collected at the border on imports, some people (wrongly) consider VATs a tariff. Considering that VAT is rebated on exports, VATs are trade neutral. Sales tax as implemented in the US is not as tax efficient as VAT due to the impact of sales taxation on intermediate transactions during manufacturing. VAT only taxes the incrementally the value added at each transaction) whereas sales tax applies to the entire value at each stage.
- pjc50 2y ago
  Does the US charge sales tax on B2B transactions? Really? Well no wonder you have problems with domestic manufacturing.
  - presto8 2y ago
    Many B2B transactions are tax-exempt but it's complicated. And gets really complicated once international transactions are considered. And also whether the company has a physical nexus in the place the product is being purchased. All in all, I think it would be simpler if the US adopted VAT. But that seems very unlikely.
    - 9dev 2y ago
      Unlikely, given that the current administration seems incapable of understanding what VAT is in the first place…
      - Yeul 2y ago
        Last I checked VAT is the same rate regardless if the product is made in China or by pinguins on Antarctica so why anyone in the US gives a damn is beyond me.
  - patmorgan23 2y ago
    There's no federal sales tax so it varies by state.
- xbmcuser 2y ago
misja111 2y ago
The answer is: rhetoric. It's a fake argument to justify US tariffs. It won't work for people like you and me, but Trump fans will love it.
dboreham 2y ago
They're not. Only disingenuous charlatans say they are.

Can someone explain to me why EU VAT is considered a tariff, while US sales taxes are not? They both seem a sale tax to me.

by pokot0 2y ago

Can someone explain to me why EU VAT is considered a tariff, while US sales taxes are not? They both seem a sale tax to me.

pjc50 2y ago

Only people who are wrong consider VAT a tariff. Yes, importers have to pay it, but so do local manufacturers. VAT has basically the same effect as sales taxes with a much more complicated tax incidence.

freeone3000 2y ago
At an individual level, it’s not more complicated: it’s reimbursed instead of exempted. And if you’re charging it, it’s easier, since you simply always charge instead of maintaining your list of exceptions.
- pjc50 2y ago
  UK VAT certainly has a complicated list of exceptions, especially "non-luxury food" (see the Jaffa Cake case https://www.astonshaw.co.uk/jaffa-cake-tax/ https://www.astonshaw.co.uk/jaffa-cake-tax/)
  - freeone3000 2y ago
    But these are per-product, not per-customer. (Businesses, charities, and some customers are exempt from sales tax regardless of what they are buying.)

charamis 2y ago

Really wondering about the same, since VAT is applied to everything too, not only imported products and services.

deleted 2y ago

[deleted]

presto8 2y ago

Because VAT is collected at the border on imports, some people (wrongly) consider VATs a tariff. Considering that VAT is rebated on exports, VATs are trade neutral. Sales tax as implemented in the US is not as tax efficient as VAT due to the impact of sales taxation on intermediate transactions during manufacturing. VAT only taxes the incrementally the value added at each transaction) whereas sales tax applies to the entire value at each stage.

pjc50 2y ago
Does the US charge sales tax on B2B transactions? Really? Well no wonder you have problems with domestic manufacturing.
- presto8 2y ago
  Many B2B transactions are tax-exempt but it's complicated. And gets really complicated once international transactions are considered. And also whether the company has a physical nexus in the place the product is being purchased. All in all, I think it would be simpler if the US adopted VAT. But that seems very unlikely.
  - 9dev 2y ago
    Unlikely, given that the current administration seems incapable of understanding what VAT is in the first place…
    - Yeul 2y ago
      Last I checked VAT is the same rate regardless if the product is made in China or by pinguins on Antarctica so why anyone in the US gives a damn is beyond me.
- patmorgan23 2y ago
  There's no federal sales tax so it varies by state.
xbmcuser 2y ago

misja111 2y ago

The answer is: rhetoric. It's a fake argument to justify US tariffs. It won't work for people like you and me, but Trump fans will love it.

dboreham 2y ago

They're not. Only disingenuous charlatans say they are.