Comment by csmpltn
7 days ago
VAT is effectively a tariff though, because it disincentivizes import/trade with the US (and other foreign countries). Since the US has no VAT, it's leading to unfair competition.
7 days ago
VAT is effectively a tariff though, because it disincentivizes import/trade with the US (and other foreign countries). Since the US has no VAT, it's leading to unfair competition.
Good write up here https://www.economicforces.xyz/p/stop-saying-a-value-added-t... about how VAT doesn't alter the levelness of the playing field re imports and exports
VAT complicates the business environment for US companies operating in the EU, and it takes a major chunk of their margins. US doesn't have VAT and has a significantly easier business environment for EU businesses to operate in - leading to an unbalanced playing field.
VAT is just one component though. Remember that US largely subsidizes and sponsors the defense of EU, Ukraine, Taiwan, Japan, etc - but those countries have been giving less and less back, over the past years.
1) EU businesses have to deal with complicated sales tax arrangements that vary by state and municipality.
2) EU businesses have to operate in their own environment and also face the VAT. There is no protectionism here. The playing field with respect to VAT is balanced, regardless of which side of the pond is (...was) an easier business environment to operate in.
VAT complicates the business environment for EU companies operating in the EU too. You're demanding that American companies in the EU should be able to operate the same way they do in the US instead of complying with local laws, ie you're just demanding the right to bring your legal environment with you. Do you believe that foreign companies who open branches in the US should be exempt from US laws and be able to run themselves according to the law in their country of origin, at their US branches? I doubt it.
> it takes a major chunk of their margins
Completely false. Cost of VAT is passed on to consumers not met by companies and as EU companies pay VAT too it doesn't force US companies to lower prices and so harm their margins.
No, VAT is not a tariff. It applies to all goods sold, not only imported ones.
VAT applies equally to domestic and foreign companies. It's a tax.
Tariffs and barriers to trade are measures meant to incentivize production in the country imposing them. That's what free trade is meant to get rid of, that's why Trump is so keen on tariffs and likes them
If a company moved a production line to within the EU from outside because of VAT they'd still have to pay the same exact amount of VAT as they did before. It's just not an incentive in that sense
Repeating this does not lead to understanding. Give a concrete example of how the rules applies which show your point...
US has sales taxes.
If anything, VAT incentivizes sustainable economy by making production more expensive than reuse.
Bullshit. VAT is levied on domestic and imported goods, from the consumer's point of view there is absolutely no difference.