[HN Gopher] The European Vat Is Not a Discriminatory Tax Against...
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The European Vat Is Not a Discriminatory Tax Against US Exports
Author : dzogchen
Score : 134 points
Date : 2025-02-15 21:20 UTC (1 hours ago)
(HTM) web link (taxfoundation.org)
(TXT) w3m dump (taxfoundation.org)
| surfmike wrote:
| Well, because we don't have a VAT, it is, isn't it? The article
| puts the blame on the US sales tax system. But regardless, US
| exporters to the EU end up paying more taxes than domestic EU
| producers.
|
| > Europe's VATs are not tariffs and are not subsidizing European
| exports. Instead, US states' poorly-designed sales taxes are
| harming their own businesses' competitiveness--whether they're
| selling down the street, across state lines, or around the world.
| jakewins wrote:
| Sorry I don't follow - how does VAT make US exporters pay more
| than domestic EU manufacturers? They are both subject to the
| same VAT, or?
| aredox wrote:
| It doesn't. It has never been. Trump is a liar and a crook
| and is bullshitting you.
| NewJazz wrote:
| For a VAT to work they have to levy the tax at each stage.
| Import is a stage...
|
| _But regardless, US exporters to the EU end up paying more
| taxes than domestic EU producers._
|
| No, because the domestic EU producers are paying VAT at each
| stage of their production process. The US manufacturers need to
| catch up!
| kvemkon wrote:
| > the domestic EU producers are paying VAT at each stage of
| their production process.
|
| As long as I know, VAT should be payed only once for a
| finished product when sold to the very end customer.
| Muromec wrote:
| No. The vat is payed by the seller on full price of what
| they sell. So does their supplier. The trick is -- yoy get
| tax credits when your supplier is a vat payer. As a result,
| the tax is collected in parts over the final price sold to
| the non-business customer.
|
| Which is why being a registered one man company with a vat
| number allows you to get back vat for your laptop
| akoncius wrote:
| > But regardless, US exporters to the EU end up paying more
| taxes than domestic EU producers.
|
| but only because of tariffs, not VAT system. we pay VAT
| regardless from where the good came from.
| tdb7893 wrote:
| As an American I don't really deeply understand VAT but I don't
| get why an American car would pay more overall VAT than a
| domestically produced car. My impression is that VAT will be
| the same for items that cost the same, no matter where they are
| produced.
| stuaxo wrote:
| It will be the same, you were right.
| Muromec wrote:
| The idea behind vat is to spread the sales tax across the
| chain, which means the government gets the money even if the
| end product didnt reach the customer.
|
| Naturally the chain breaks at the border, so importers pay
| vat and exporters get vat refunds.
|
| In the end its just a sales tax
| aredox wrote:
| I don't get why you believe the liars who told you an
| American car would pay more overall VAT than a domestically
| produced car. I mean, you are getting lied to your face, by
| someone who is a serial liar, so why are you trying to find
| an explanation for something that doesn't exist?
| AndrewDucker wrote:
| VAT applies equally to imported goods and locally produced
| goods.
| smooc wrote:
| VAT is applied on every good sold. So no. If you are able to
| produce cheaper and shipped cheaper than your EU competitor it
| will be cheaper when a consumer buys it.
|
| The consumer pays the VAT, not the producer.
| aredox wrote:
| Are you dense? The VAT applies to all purchases and doesn't
| discriminate on where an item is produced.
|
| Have Americans become really _that_ dumb?
| devuo wrote:
| I think it's more a case of intellectual dishonesty.
| ceejayoz wrote:
| https://www.urbandictionary.com/define.php?term=The%20Rule%
| 2...
| watwut wrote:
| Yeah and no. I would see intellectual dishonesty as worst
| and the fact that we did not called it that for years
| enabled these people. They were giving all possible
| benefits of the doubt. And calling them dumb is kind of
| benefit of the doubt.
| umanwizard wrote:
| > Have Americans become really that dumb?
|
| It's not a question of being dumb or not, but rather that VAT
| doesn't exist in the US so most people don't understand how
| it works, if they have even heard of it at all.
|
| Instead of VAT, most states have sales tax, which is similar
| in spirit but doesn't work the same way.
| coolgoose wrote:
| I mean, I get it to some extent, but there's literally an
| article linked on this whole thread that we're all
| commenting, explaining why not...
| nabla9 wrote:
| The linked article explains VAT.
|
| Being confidently wrong in the comment section is dumb and
| arrogant.
| aredox wrote:
| There is absolutely nothing, at any step, that takes into
| account _where_ an item has been produced when the VAT is
| calculated. You don 't need to know anything about VAT to
| understand at least this very tiny, simple and obvious
| fact.
|
| But apparently facts don't mean anything anymore in that
| crazy country there.
| kylehotchkiss wrote:
| The majority of Americans have not been exposed to VAT. Most
| people see a thing that has value and don't want to think of
| each step in manufacturing, and try to reconcile that. To
| even educated Americans, it takes some thinking to understand
| both what VAT is and why it's beneficial over us based sales
| tax.
|
| The mistake I think Vance made was assuming that Europe
| doesn't tax its own vehicles 30%. If he wants to
| "reciprocate" by impose higher taxes on BMWs, Mercedes, and
| Audis so I don't have to deal with their drivers egos every
| time i go on the highway, let him. This is not a product
| class that is adding much value to our society in my opinion.
| I would hope they aren't so difficult on Honda/Toyota since
| both brands provide good reliable cars while US manufacturers
| try to get their shit together
| przemub wrote:
| Lol no.
| Tzk wrote:
| You pay VAT on all products when they're sold or imported. In
| Germany it's 19% and called "Mehrwertsteuer" for the domestic
| products and "Einfuhrumsatzsteuer" for imported products.
| There's an additional Import tax on some products.
| epolanski wrote:
| No both pay the very same amount of taxes.
| wesselbindt wrote:
| Whether or not some action is discriminatory is inherent to
| that action. Something I do can't be considered discriminatory
| because of what someone else does. So for example, if I shake
| hands with all people of all colors, you cannot call that
| discriminatory just because my neighbor doesn't shake hands
| with people. That would be completely nonsensical.
|
| Similarly, if the EU applies VAT to all goods sold, that can't
| be considered discriminatory just because some other country
| doesn't apply VAT.
| gamblor956 wrote:
| Non-European companies don't pay VAT or deal with VAT
| compliance unless they have sufficient business in Europe that
| they are required to register for local tax compliance.
|
| European customers handle the VAT themselves when dealing with
| non-VAT-registered non-European suppliers; this is known as the
| "reverse charge" mechanism and it's generally a feature of
| almost every VAT system in the world. (In a nutshell, the
| customer charges themselves VAT and pays it on their own VAT
| return. This is similar to the way "use tax" works in the U.S.)
| vages wrote:
| I really liked the critique of the US sales tax. I did not know
| such taxes still existed.
| cjs_ac wrote:
| > Note that, while a VAT is imposed at every stage of the
| process, the net effect is to apply the rate one time to the
| final sales price. The tax is collected in increments (on the
| "value added" at each stage), but unlike with a pyramiding sales
| tax, it does not double tax inputs. The VAT and ideal sales tax
| share an identical tax base and, if imposed at the same rates,
| yield identical collections.
|
| The VAT is important in Europe, because if a product is
| manufactured in many countries, each of those countries gets a
| share of the tax revenue.
| tobias3 wrote:
| B2B sales between European countries don't have a VAT.
| procaryote wrote:
| VAT on b2b sales even within an European country are usually
| not that important.
|
| You add VAT to things you sell (e.g. car repair services),
| you pay VAT on things you buy (e.g. car parts). If you
| collected more VAT on sales than you paid on purchases, you
| owe that to the tax department.
|
| It's a bit of book-keeping but doesn't affect your profits
| directly.
| luckylion wrote:
| They do, it's just that many choose the reverse charge
| mechanism, so the recipient of the services or goods is
| responsible for paying the VAT to his tax authority. It makes
| things easier, it doesn't remove VAT.
| beejiu wrote:
| For almost all B2B cross-border transactions between two
| VAT registered entities, the reverse charge is mandatory,
| not something that you can choose to opt in to.
| beejiu wrote:
| No, only the end consumer pays VAT in the country of
| consumption. Everything else nets out, because as a supplier
| you either you claim back the amount of VAT you've been charged
| from your local tax authority or you are subject to a "reverse
| charge" where the cross-border supplies are effectively treated
| as domestic for tax purposes.
| mrbabbage wrote:
| this is correct. the main advantage of a VAT is incentive
| alignment. every intermediary producer must collect and remit
| VAT if they want to claim their VAT refunds for inputs. i.e.,
| a seller of a good in Europe _must_ collect VAT if they want
| to claim a VAT refund on whatever they paid for the good.
|
| compare to American sales taxes, where sellers have no
| _economic_ incentive to collect sales taxes beyond the
| probability of being caught and fined.
| luckylion wrote:
| Primarily though, they must collect VAT because it's the
| law. In Germany, you can get an exception if you're tiny
| and have very low revenue.
|
| If it was optional if you didn't want to claim expended
| VAT, quite a few companies would happily choose that,
| because you don't pay VAT on labor and that's the biggest
| cost in many industries. If you're primarily b2c, you could
| effectively lower your prices by a good chunk or get a
| healthy chunk of extra profit.
|
| But you can't, because there's no choice, it's just the
| law.
| JetSetIlly wrote:
| How does Germany define low revenue for VAT purposes? In
| the UK, the threshold for compulsory VAT registration is
| currently PS90,000 annual revenue, which I would say is
| quite large.
| ncruces wrote:
| In my country, segments more prone to "informal" sales
| (SMEs, cash transactions, limited incentive for
| paperwork), have reduced VAT (final sale has a reduced
| rate compared to many supplies), and the customer can get
| some of that VAT back as an income tax deduction if they
| demand to be invoiced.
|
| The advantage of this, is that if you have to have
| accounting for sales, you'll probably have accounting too
| for labour, and you'll also pay income tax, social
| security, etc.
| carlosjobim wrote:
| This is such a common misconception that even business owners
| get wrong. No, it doesn't even out for the business, because
| they sell their products with a profit and thus pay more in
| VAT than they get back. You only get more back if you're
| selling for cheaper than it costs you to make it, meaning
| you're out of business pretty quick.
|
| Edit: Congratulations to the people who are down voting very
| basic mathematics.
| beejiu wrote:
| Businesses don't "pay" VAT, they collect and remit VAT on
| behalf of the tax authority. A business (supplier) that
| doesn't sell to end consumers pays no VAT, even though they
| collect a lot and reclaim a lot. It fully nets out.
| carlosjobim wrote:
| No, that's not how it works. If a business sells to
| another business, then the buyer is the consumer, and VAT
| has to be paid. And of course they have to sell with a
| profit.
|
| Many B2B offers and proposals are negotiated or priced
| without VAT mentioned, but it is absolutely added to the
| bill.
|
| The only time it "nets out" is if a business has the same
| expenses for their purchases as for their sales, meaning
| they're soon bankrupt.
| autobodie wrote:
| See "end-consumer"
| Aloisius wrote:
| It nets out to everyone but the final consumer. Imagine
| 30% VAT rate:
|
| Alice digs up some copper and tin and sells it to Bob for
| 10EUR + 3EUR VAT = 13EUR. Alice remits the 3EUR to the
| authorities on Bob's behalf.
|
| Bob casts bronze bars and sells them to Carol for 39EUR +
| 11.70EUR = 50.70EUR. Bob claims a 3EUR refund for VAT he
| paid Alice and remits 11.70EUR to the authorities on
| Carol's behalf.
|
| Carol makes a sculpture from the bronze and sells it to a
| customer for 1014EUR + 304.20EUR VAT = 1318.20EUR. Carol
| claims a 11.70EUR refund for VAT paid and remits
| 304.20EUR to the authorities.
|
| The end customer ends up paying 100% of the total VAT
| (304.20EUR). Everyone else nets out to 0.
| Denvercoder9 wrote:
| > A business (supplier) that doesn't sell to end
| consumers pays no VAT
|
| They indeed pay no net VAT (it's not a cost for them in
| the sense of their profit and loss statement), but they
| do remit a bit of the VAT collected by the end consumer
| to their _local_ tax authority.
|
| As an example, let's consider a VAT rate of 20%, and a
| Dutch company that buys from a French one and sells to a
| German one. Their costs per product are EUR80, and thus
| they pay EUR16 of VAT over that to their French
| suppliers. If they sell a product for EUR100 (i.e. they
| add EUR20 of value), then they collect EUR20 of VAT from
| their German buyers (which might in turn get it from the
| end consumers). There's a difference of EUR4 between what
| they received and paid in VAT, and that difference is
| collected by the Dutch tax authority. That EUR4 is not
| coincidentally the 20% VAT over the value added by the
| Dutch company.
| elgenie wrote:
| Which really shouldn't be surprising: if a business is
| _not_ adding value, it 's not a viable business. But if a
| business is adding value on net, it should indeed _owe_ tax
| charged on net value added.
| ghufran_syed wrote:
| but don't they already pay tax on their profits? What's
| the rationale for taxing the "value added" and then
| _also_ the profits?
| tonfa wrote:
| I don't know the initial incentives, but VAT is much
| harder to evade (businesses have to keep track/declare
| things if they want to reclaim the VAT they paid).
|
| Also it's a consumption tax, in the end the end consumer
| is the one paying it (through higher price). The
| businesses in the middle are mainly collecting the tax on
| behalf of the state.
| Jolter wrote:
| Look at it as VAT taxing your turnover rather than your
| profit and you might start to see why they are different
| things.
|
| A state might want to tax both of them at some level,
| because even unprofitable businesses should contribute.
| Or they might not.
| crazygringo wrote:
| I mean, what's the rationale in the US for a business
| being taxed on their profits, and _also_ having to pass
| along the sales tax they 've collected?
|
| It's just two forms of taxation. Sales tax/VAT is a fixed
| proportion of sales, and _then_ you also pay tax on
| profit that 's left.
|
| You might as well ask why people pay income tax when they
| make money and then have to pay sales tax/VAT again when
| they spend it!
|
| Of course, answering _that_ is complicated, and there are
| a lot of factors. But the main one is basically that
| governments like to tax "everything", so that
| people/goods/services that might wind up evading one tax
| wind up paying another. Sales tax makes sure governments
| get revenue even when businesses make no profit, taxing
| profits makes sure governments get more revenue when
| businesses make more money.
| manmal wrote:
| It's not really a tax on their profits. Consumers have to
| pay it on top of the net sales price, and they know that
| it won't add to the company's bottom line. The money goes
| to the state every month (or quarter sometimes), deducted
| by the VAT the business itself already paid for
| services/products.
|
| For accounting purposes, VAT is a totally separate cycle
| of money, and for every important financial metric, VAT
| is ignored. [Removed] If you happen to spend more VAT
| than you collect, you'll get the negative back from the
| state. Also, the net price is always known because it
| must be shown on every invoice.
| eastbound wrote:
| On a product of 120EUR with 70EUR wages, they pay 20EUR
| VAT on the 100EUR-before-tax, and they pay 25% IS
| (corporate tax) on the 30EUR margin, so 7.5EUR (this
| example is for France). If they distribute the remaining
| 22.5EUR as dividends, the recipients pay up to 30% IR, so
| 7EUR.
|
| VAT is most of the tax revenue by far. France's budget is
| made of 50% VAT, 15% from corporate tax (IS), 10% from
| income tax (IR) and then the rest from various state
| revenue (like renting the palaces for movies).
|
| VAT >> other revenues.
| wongarsu wrote:
| Everybody pays VAT. As a business you charge VAT for
| everything you sell and pay that out to the tax authority,
| and you get VAT back for anything you buy. As a consumer it's
| just an item on the bill.
|
| Say the VAT rate is 20%. Now if you buy something for $100,
| install it and charge $100 to your customer, you get back $20
| from the tax authority and pay them $20, so if billing cycles
| align no money actually flows to or from the tax authority.
| But if you add value, say by buying $100 in parts, assemble
| them and sell the assembly for $150, you get back $20 for
| parts purchased but collect $30 for the sale, creating a net
| flow of $10 to the tax authority.
|
| If everything happens under the same tax authority this
| nuance doesn't matter, in total there's always a $30 tax on a
| $150 part, no matter how complex the supply chain. But if
| more countries are involved the difference matters: if a
| company in Poland makes parts worth $100 and a company in
| Germany assembles them and sells them in the German market
| for $150, that's $20 in taxes for Poland and $10 for Germany.
| With a sales tax that's only collected when selling to a
| consumer it would have been $30 for Germany and $0 for
| Poland.
| beejiu wrote:
| The Polish company invoices the German company under the
| "reverse charge" regime. The German company treats the
| parts as if they were supplied by another Germany company,
| charging itself German VAT and refunding itself an equal
| amount of German VAT. There's nothing collected in Poland.
| manmal wrote:
| Your second example seems flawed. All $30 go to Germany,
| due to reverse charge (where no VAT is collected in
| Poland).
| rafaelmn wrote:
| That's not how VAT works in EU, when I'm buying stuff as
| business expenses from EU I need a reverse charge bill with
| my VAT ID and no VAT is applied on purchase. If I buy
| locally then I subtract the input when I'm paying my VAT or
| request a return if it's more than I owe in VAT (which
| happens when you are selling to other countries).
| 486sx33 wrote:
| And therein lies the rub. Any goods / materials from outside
| the VAT zone will have VAT charged on the import. Vis--a-vis
| a tariff.
|
| Example I manufacture and sell teak wood tables in Portugal.
| I buy the wood from Asia, which does not have a VAT and is
| outside the EU. When I import said wood, I get assessed a
| value to pay VAT on. This is a tariff. I buy the stain and
| finish from Germany, which is inside the EU and has a VAT,
| through a complex paperwork system, I also pay VAT when the
| finish gets imported to me, but eventually I can claim that
| VAT paid back and it "nets out". So I get this back. How do I
| get it back? I can subtract VAT paid from the VAT collected
| when I sell the goods.
|
| Yes, VAT is a tariff, by a different name.
| 486sx33 wrote:
| In Linux terms, it's GPL and it "infects" everything it
| touches :)
| jakewins wrote:
| I've heard it's also liked among economists because it's like..
| "sound", somehow, or "efficient" as far as taxes go? Like a lot
| of special taxes, tariffs, deductions have super complex side
| effects, kickbacks, unexpected payees and loopholes.. but as I
| understand VAT is relatively "sane" on paper?
|
| But also there was something about taxing consumption that was
| bad somehow.. is it regressive? I don't remember. Feels "flat",
| but maybe not?
| Epa095 wrote:
| Neutral is the word. It means that the tax does not change
| what's the rational actions vs if the tax was not there.
|
| And yes, it's regressive relative to income. Poor people
| spend all their money on essentials, paying the vat on all
| their income. Rich people can save most of their money (e.g
| in stocks), and end up paying a much smaller percentage of
| their income in VAT.
| noirscape wrote:
| It should also be added that in most EU countries,
| essentials like food have a lower VAT rate than luxury
| goods, specifically as an attempt to address this.
| amarcheschi wrote:
| Depending on the country, personal care products as well
| (...) basically, essentials are taxed at varying lower
| rates in respect to the normal rate
| nemomarx wrote:
| fairly normal for consumption taxes, right? us sales tax
| has similar carve outs for food and personal care and
| meds etc
| plantain wrote:
| Is this really true? I observe much more DIY in countries
| with high VAT's, because your own labor does not have VAT.
|
| If I work on my car, and you work on your house, we are
| both financially ahead than if you had worked on my car,
| and I had worked on your house.
| riffraff wrote:
| it is regressive, it impacts small earners more than rich
| people, since a larger share of their income goes into direct
| consumption.
|
| But many countries have different VAT brackets for different
| goods, e.g. in Italy at different times (I'm not sure of the
| current brackets) "staple" goods like bread or milk had 4%
| VAT, health and education had 5%, fish or meat had 10%,
| generic services have 22% and at some point "luxury" goods
| had 30%+ vat.
|
| This offsets the regressiveness somewhat.
| wahern wrote:
| Yes, on paper VAT works out better, and it's a darling of
| economists. In practice, VAT requires more paperwork,
| accounting, and interaction with the bureaucracy. The end
| result is that even though the U.S. has the tax pyramiding
| "problem", you find much more tax avoidance in Europe than in
| the U.S. Grey and black markets constitute a huge, double-
| digit fraction of the European economy, and it's what helps
| sustain organized crime there, even in stereotypically rule-
| abiding Germany. Like many things in Europe, VAT works well
| for large enterprises; it's quite burdensome for small
| businesses, and that's probably where the complaints are
| coming from--small and medium-sized businesses in the U.S.
| who find dealing with EU taxation daunting.
|
| In school (economics, law) I had learned all about how great
| the VAT system is. But about 10 years ago I wanted to buy a
| simple ~$100 rack shelf to fit a PC Engines APU from an
| Italian manufacturer. I had to create an Italian tax ID,
| which was annoying. I recently had to use it again just to
| buy some tins of anchovies from Italy.[1] In both cases I
| received more paperwork regarding the VAT than I did the
| import paperwork. It seems slight but it's actually quite a
| lot of friction compared to just giving X dollars and
| receiving your product. Dealing with tax and import crap is
| exactly why import/export companies exist, creating needless
| intermediaries that siphon value.
|
| In that light, the "inefficient" sales tax premiums we pay in
| the US can be interpreted as the cost of enjoying a more
| decentralized taxation system that makes compliance more
| convenient and transactions run smoother. There's less
| accounting and--more importantly (because US accounting can
| be complex, too)--less coordination required. It's the
| economics version of worse is better.
|
| [1] And just to be clear, in both cases I was purchasing
| through a clearly retail-oriented store website. IOW, even as
| an effectively retail consumer you had to provide a tax ID--
| the equivalent of an employer ID or social security number in
| the US. I don't know if this is a hard requirement for retail
| generally in Europe, or just the easiest way for them to deal
| with VAT accounting on their end when only a small portion of
| their business is retail.
| devuo wrote:
| Comparing VAT to an Import Tax is unbelievably stupid.
| r0ckarong wrote:
| That's what it says on the flag don't it?
| marcosdumay wrote:
| On a tangent, Trump decided to punish Brazil be setting the
| import tax on ethanol as whatever Brazil sets for importing
| US ethanol.
|
| Now that our government controls the domestic price of fuel
| in the US, it's too bad Lula doesn't seem to be in a trolish
| mood...
| watwut wrote:
| I do not understand what do you mean here?
| ronbenton wrote:
| It's important to remember that the point is not to be
| technically correct, the point is increased American
| isolationism and a weakened West
| drawkward wrote:
| A page straight from Aleksandr Dugin's playbook for Russian
| dominance:
|
| https://en.wikipedia.org/wiki/Foundations_of_Geopolitics
| ronbenton wrote:
| Indeed, it reads like a play-by-play of current events.
| What a coincidence.
| Muromec wrote:
| A lot of what the maga team is doing is
| frereubu wrote:
| I dunno, given the quality of talent at the top of the Trump
| administration I'd probably describe it as believably stupid.
| seydor wrote:
| Of course it's not.
|
| In fact the complexity of vat in europe is a disadvantage when
| dealing with things like small transactions. We have resorted to
| using an American company as a merchant of record to manage the
| complex invoicing for us, even if they keep a percentage of the
| sales.
| gamblor956 wrote:
| VAT is simple unless your company has a very large, broad set
| of products. It's a PITA to deal with due to the invoicing and
| documentation requirements, but that's due to the volume of
| work required, not the complexity of it.
| kyrra wrote:
| So it's simple but hard?
| secondcoming wrote:
| Simple but tedious
| surfingdino wrote:
| Expensive. Dealing with all EU tax authorities is expensive
| and that cost can be prohibitive for smaller businesses.
| epolanski wrote:
| There's nothing complex in vat and in general it's paid only
| once, when it reaches the latest customer. Most B2Bs don't pay
| vat obviously.
| coolgoose wrote:
| You never had to handle cross country VAT it seems, and the
| stupid regulations that changed to make it require vat
| collection on the country of the payee :)
| Ekaros wrote:
| They are sensible regulations, but single market consisting
| of multiple countries with own fiscal and taxation policies
| is always somewhat complex thing.
|
| Still, my understanding is that if you know the country and
| classify product like you know the rate. So it is less
| complex than sales taxes which might be local in other
| places.
| omnimus wrote:
| Not anymore. For few years there has been EU VAT one stop
| shop system where you pay to your local tax office. And
| with digital products it's even easier with "VAT Mini One
| Stop Shop" (MOSS).
|
| So for EU to EU company it's actually very simple.
|
| But in mean time many other countries made some version of
| "digital tax". So you want to have this handled by someone
| anyway.
| Muromec wrote:
| It isn't paid once, otherwise you would not need credits.
| tonfa wrote:
| Isn't this the entire idea of the VAT?
|
| B2B sales have VAT applied, but before sending the VAT money
| it collected, the company deducts the VAT it was charged when
| it bought the goods. (each company ends up sending tax money
| that covers how much value it added)
|
| (it's a bit more complicated when it's cross country since it
| involves refund rather than deducting, but that should be the
| same idea)
| thomasmg wrote:
| The VAT is not complex. And why would an American company be
| better at invoicing?
| coolgoose wrote:
| I find it funny that a lot of people can't read the article, so
| here's an ELI5 case on why VAT isn't discriminatory from our
| lovely Franch LeChat.
|
| Going to add TLDR for people: Vat applies to all shit on the
| market, regardless of where the fuck you produced it.
|
| ---
|
| The Value Added Tax (VAT) in Europe is designed to be a
| consumption tax that applies equally to both domestically
| produced goods and imports. This means that whether a product is
| made locally or imported from another country, the same VAT rate
| is applied when the product is sold to the end consumer. This
| approach is intended to create a level playing field, ensuring
| that local producers do not have an unfair advantage over
| importers, and vice versa.
|
| The reason VAT is not considered discriminatory against imports
| is that it is applied at the point of consumption rather than
| production. When goods are imported into the EU, they are subject
| to VAT at the same rate as similar goods produced within the EU.
| This ensures that the tax burden is the same for both local and
| imported products, promoting fair competition. Additionally,
| businesses can often reclaim the VAT they pay on purchases,
| including imports, which further neutralizes any potential
| disadvantage.
|
| However, it's important to note that while VAT itself is not
| discriminatory, other factors such as customs duties and
| regulatory standards can still affect the competitiveness of
| imports versus local produce. These factors are typically
| addressed through separate trade policies and agreements rather
| than through the VAT system.
| lazyeye wrote:
| And if you read a previous comment it effectively means
| imported goods are taxed twice. Both in their country of
| manufacture and then again in the country where they are sold.
| It makes sense to tax local companies with a VAT tax to fund
| their local govt/infrastructure. But imports are get nothing
| for that tax. If you are a European exporter and there is no
| tariff/tax in your export destination then you only get taxed
| once.
|
| And thats why "where the fuck you produced it" matters.
| rahkiin wrote:
| But those taxes serve different purposes? On fuel we have VAT
| (for commerce) and also other taxes (for road maintenance).
|
| Get yourself a good transatlantic deal to get rid if import
| taxes (and stick to it)
| grg0 wrote:
| Is Stephen Miller really that stupid, or does he have an agenda
| to gut American business? One really has to wonder if he's
| actually a spy from an adversarial nation.
| markhahn wrote:
| motivated reasoning is the main problem.
| mullingitover wrote:
| Everything with these people makes sense when you understand
| that they want to break down the United States into their own
| corrupt little fiefdoms. They are anti-Union, not just with
| workforces, but with nations, because united people are harder
| to exploit.
| ronbenton wrote:
| By weakening its ties with Europe and other allies, the US is
| undoubtedly taking actions that benefit both Russia and China.
| That's not to say the president or his team are in cahoots with
| one or both of those countries, but these are the kinds of
| actions the US would be taking if that level of conspiracy were
| to be true.
| outside1234 wrote:
| You can't look at this as having logic. It is a mob shakedown
| of everyone, including you.
| markhahn wrote:
| egads. stephen miller is another festering embarrassment to the
| country.
| lucasyvas wrote:
| This is going to be used as the basis of the tariff. It doesn't
| matter if the Trump administration is correct. Take it from a
| fentanyl-slinging Canadian - they're either dumb or grasping for
| straws / full of shit.
|
| They are telling you tariffs are coming and they have identified
| the scapegoat to communicate to their voter base.
|
| That's all you need to know. I'm honestly not sure why anyone is
| bothering discussing it since it's a waste of time.
|
| If you are debating it, it means you are already behind the curve
| of understanding of where it's going.
| jamesblonde wrote:
| No idea why you're getting downvoted. The rules of the game
| have changed. The rational actors will have to adapt.
| lucasyvas wrote:
| Bots or people in complete denial. People are waking up a bit
| slower than expected to the reality of what is happening. I
| completely understand in a way, because it only becomes clear
| once the barrel is pointed at you. At that point, it's too
| late.
|
| Trying to help out where I can - this is all misdirection.
| I'm sure there are a lot of smart people on here fascinated
| by pattern recognition. It's their time to shine.
| shaky-carrousel wrote:
| As a European, I see it as a blessing in disguise. America is a
| reckless country that goes from crisis to crisis due to being
| terminally greedy. And now, they're even unable to keep a
| stable political landscape. The fewer economic ties we have,
| the better.
| yodsanklai wrote:
| Unfortunately, this insane country has the means to literally
| annihilate the whole planet, loot most other countries, or
| simply sabotage them.
| lucasyvas wrote:
| They don't have the will they just want you to think they
| do.
| surfingdino wrote:
| As a European myself, I wouldn't be too sanctimonious. The EU
| has a lot to fix internally.
| nonethewiser wrote:
| From the US's perspective, what does it matter? The fact is VAT
| is applied to US imports.
| lucasyvas wrote:
| And I also pay general sales tax (GST) and provincial sales
| tax (PST) on everything imported from the US, or domestically
| made. Are you dense?
| jsnell wrote:
| What you're ignoring is that the VAT is not just applied to
| imports. It's applied to all consumption, it doesn't matter
| whether the good was imported, produced locally, or a mix.
| watwut wrote:
| From the US perspective, US is not discriminated against when
| it has exactly the same rules applied to them as anyone else.
| So, yes, it matters from the US perspective.
|
| It may not matter for the lies US spreads and sells, but that
| is different thing then perspective.
| lucasyvas wrote:
| I can understand that phrasing - it sounds like they're
| trying to impose the American way on sovereign nations. I
| think they may be surprised that they get nowhere on this.
| jeeeb wrote:
| Just like it's applied to domestically manufactured goods as
| well ...
|
| The fact is the tax does not discriminate based on origin of
| the goods. It's a tax on consumption.
|
| So from the US perspective it matters to the degree that
| using a false premise to impose import tariffs might harm US
| interests.
| loxodrome wrote:
| The VAT is France is applied to just about everything, not just
| imports, and is typically 20 fucking percent. You're right, it's
| not discriminatory. It's confiscatory.
| aredox wrote:
| Yeah, yeah. Go to Somalia, Galt.
| secondcoming wrote:
| The UK is also typically 20%. Basic items such as bread and
| feminine hygiene products are VAT free.
| bikson wrote:
| Let's wait until they learn about public health care.
| alexey-salmin wrote:
| > Despite the appearance of subsidizing exports and punishing
| imports, however, a border-adjusted VAT is trade neutral. A
| border adjusted tax leads to currency appreciation for the
| imposing country, which would make it cheaper to import goods,
| more expensive to export goods, and thus would cancel out the
| apparent benefits of the tax on imports and the rebate on
| exports.
|
| This isn't even remotely true
| ReptileMan wrote:
| From the point of view of a US company VAT and Tarif are
| indistinguishable - they make exports 20% more expensive, so US
| company export less.
| Taniwha wrote:
| If you're going to start equating VAT (essentially sales tax)
| with tariffs you open the whole nightmare can of worms that is US
| sales tax to the rest of the world - for those not living in the
| US every state, and in some cases every county has its own sales
| tax rate ....
| nxm wrote:
| Sales tax is the same across all goods sold in the US,
| irrespective of whether they were imported or not. VAT rate
| differ based on the origin which is the issue
| fiddlerwoaroof wrote:
| This isn't true: local (to me) jurisdictions vary between an
| 8ish% sales tax and a 10% sales tax. In many states, there's
| no sales tax on food but food is taxed in Alabama. There's
| any number of variations of this in the US.
| watwut wrote:
| > VAT rate differ based on the origin which is the issue
|
| Which is a lie. They do not differ based on the origin and
| that is not the issue.
|
| The issue is that American top politicians are used and
| enabled to brazenly lie and their voters spread it happily.
| falcor84 wrote:
| In what way does VAT differ based on the origin? All VAT is
| cancelled out except for the final purchase by a consumer,
| no?
| alistairSH wrote:
| WTF? No. Not even remotely true. Rates vary by state and
| locality. And vary across type of good being sold. You
| couldn't be more wrong if you tried.
|
| https://taxfoundation.org/data/all/state/2024-sales-taxes/
| MaxGripe wrote:
| It's important to understand that (in simple terms) businesses do
| not actually pay VAT. VAT is a tax that ultimately burdens
| consumers, not companies. When a business purchases a product
| that includes VAT, it initially pays the VAT amount. However,
| when the same business later issues invoices for its own products
| or services (also including VAT), it is required to remit the VAT
| to the tax authorities minus the VAT it has already paid on its
| own purchases.
|
| In practice, this means that if you sell something with VAT to a
| company, the VAT component is irrelevant to that company. This
| is, of course, a simplified explanation, but fundamentally,
| that's how the system works.
| 4ndrewl wrote:
| Logic doesn't matter, these are all power plays. Truth be damned.
|
| Just like Trump exclaiming that it's "unfair" that Europeans
| don't buy American cars - we don't have big enough streets and
| fuel is 4 x as expensive.
| jujube3 wrote:
| Even if the VAT tax ends up being the same for imported goods
| versus domestically produced goods, that is still a
| discriminatory tax against the import. The reason is because the
| imported good already paid taxes in the country it was produced
| in.
|
| It makes sense for a German car manufacturer to pay taxes to
| Germany, since the German state provides it with services (roads,
| police, infrastructure.) It makes no sense for an American car
| manufacturer to pay taxes to Germany since it gets no services
| from Germany. (And no, earning the "privilege" of unloading the
| car from the boat isn't worth 20%.)
|
| If the EU has an interest in making this fair, they can remit the
| sales tax they collected to the US government. Or they can just
| accept that this is a discriminatory tax and may incite another
| discriminatory tax on the US side.
| nonethewiser wrote:
| Yeah the distinction doesnt mean anything from the US
| perspective.
| bathtub365 wrote:
| On the off chance that someone in Germany buys an American car,
| wouldn't the purchaser be the one paying VAT? I.e. not the
| manufacturer
| vuxie wrote:
| This is not how a VAT works. An American car manufacturer
| _selling_ a car to Germany means that the importer on the
| German side pays the tax, not the American. VAT is always
| applied to the buyer, not the seller.
| xyzzy9563 wrote:
| Isn't that how regular tariffs work too?
| watwut wrote:
| Tariff is applied to import and export. VAT is applied to
| everything, including domestically produced things. German
| cars pay the same VAT which makes it fundamentally
| different them VAT.
|
| So, stop lying.
| vuxie wrote:
| A regular tariff is also paid by the buyer yes, the comment
| i replied to seems to not understand either concept. Where
| the VAT is different is that since all products are taxed
| the same regardless of origin there is no advantage given
| to any origin. A tariffs would make the foreign product
| less attractive. VAT does not.
| unilynx wrote:
| All taxes are ultimately paid by the consumer, companies just
| collect them. So German consumers who buy American cars pay
| their tax to Germany.
|
| When a company buys from another company, no net VAT is
| collected - it's only collected when a consumer enters the
| picture.
| Aerroon wrote:
| > _and may incite another discriminatory tax on the US side._
|
| The US already has some of these. Eg YouTubers all have to pay
| taxes to the US government even if they are not US citizens,
| have never been to the US, and interact with Google Island Ltd.
|
| My understanding is that the basis of this tax is that it's
| "money earned from American viewers" or something along those
| lines.
|
| Imagine if every country in the world did something like this.
| loodish wrote:
| By this logic an American state should remit the sales tax they
| collect on imported cars back to Germany. The Germans would
| probably love this, twice as many German products are sold in
| the US as US products sold in Germany.
|
| Sales Tax, Value Added Tax, Goods and Services Tax, are all
| taxes on consumption. They are paid by the consumer at the
| location of the consumption. They aren't a tax on production or
| producers.
| rwj wrote:
| Sorry, but a VAT is paid for by the final consumer. US
| suppliers paying taxes would be a manufacturer's sales tax
| (MST), but they went out of style decades ago. If any states
| are dumb enough to still have an MST, maybe they should start
| there.
| gotoeleven wrote:
| Unless I missed something, this is the entire explanation of why
| the VAT isn't like a tariff:
|
| >>>VATs are border-adjusted, meaning they rebate tax on exports
| and impose tax on imports. Despite the appearance of subsidizing
| exports and punishing imports, however, a border-adjusted VAT is
| trade neutral. A border adjusted tax leads to currency
| appreciation for the imposing country, which would make it
| cheaper to import goods, more expensive to export goods, and thus
| would cancel out the apparent benefits of the tax on imports and
| the rebate on exports.
|
| The rest of the article is just about how US sales tax sucks. So
| VATs are not like a tariff because they put pressure on
| currencies to adjust in value? Huh? Can someone explain what
| taxfoundation is talking about?
|
| If I make two ford fiestas, one in the US and one in Germany and
| they are otherwise identical--identical labor costs, identical
| shipping costs, etc etc--do I have to sell each ford fiesta in
| germany at a different cost to the consumer (so including all
| taxes levied on the consumer) for me to make the same profit on
| each fiesta? If so, then I dont see what is dishonest about
| likening the VAT to a tariff.
| Ekaros wrote:
| Cost inside Germany are inclusive of VAT. So German
| manufacturer pays to their supplier price of item + VAT. VAT is
| send to tax man. And when they then sell it to consumer they
| get to deduct from VAT they charge the amount they were charged
| themselves. So in the end consumer pays all of the VAT.
|
| When you ship car to Germany, you have to charge this VAT from
| consumer too. But now as you did not previously pay any you
| charge full amount and get nothing back.
|
| In each step inside Germany the intermediate buyer was charged
| more than outside where there were no VAT.
| Aerroon wrote:
| > _If I make two ford fiestas, one in the US and one in Germany
| and they are otherwise identical--identical labor costs,
| identical shipping costs, etc etc--do I have to sell each ford
| fiesta in germany at a different cost to the consumer (so
| including all taxes levied on the consumer) for me to make the
| same profit on each fiesta?_
|
| No, probably. It depends on the price of the materials you use.
| It's a _value added_ tax. It taxes the value that you created.
|
| Lets say you buy EUR5000 worth of steel and then make it into a
| car that you sell for EUR10,000. With a 20% VAT rate the
| government gets EUR2000 and you get EUR8000.
|
| However, that steel you bought also included 20% VAT in its
| price (EUR1000). You get this money back from the government.
| The steel actually cost EUR4000 for you.
|
| In total your profit would be EUR4000. Effectively, the 20% VAT
| applies to the EUR5000 of value that you created.
|
| ---
|
| If you built that Ford Fiesta outside of the EU then the "value
| add" is the entire price of the vehicle. But you don't have to
| pay VAT for the raw materials you buy, so theoretically it
| should end up being the same amount of profit.
| rayiner wrote:
| > Trump commonly mentions that the EU charges a 10 percent import
| tax on US vehicles while the US only levies a 2.5 percent tariff
| on European cars coming into the US
|
| That seems pretty significant no? Why do we need German cars
| anyway?
| eigart wrote:
| They are better.
| diegocg wrote:
| The Trump team is not stupid and understands that the Vat tax is
| not discriminatory. The problem is in their logic and propaganda
| - "USA has a trade deficit because everyone is taking advantage
| of us".
|
| Then they look here at the EU and it turns that it has very low
| tariffs for the US, and the trade still has a large deficit. That
| goes against everything they say, so what excuse are they going
| to use against Europe?
|
| They are not going to admit that their logic doesn't follow
| problem is elsewhere. And they know perfectly well that because
| the Vat tax is not a tariff, and because EU governments depend on
| the revenue they get from it, it is impossible for them to get
| rid of it. They really want these tariffs just because that's
| what they believe, that tariffs are 100% good, the reasoning
| doesn't matter
| bitshiftfaced wrote:
| > If there is a complaint to be made about tax policy and
| implications for US competitiveness in Europe, it is about
| uncompetitive state sales tax structures in the US system that
| yield what is known as "tax pyramiding."
|
| The average state sales tax is probably less than half the
| average European VAT, so even when you double tax, state taxes
| are likely still more competitive.
|
| > If a European resident orders from a US retailer, they do not
| pay US sales tax, just like a US consumer can obtain a VAT rebate
| on purchases of European products. Neither is a subsidy. These
| are simply consumption taxes falling on the consumer.
|
| I wonder how often the US consumer actually gets a VAT rebate on
| their imported purchases, or how many US consumers are even aware
| of this.
| jsnell wrote:
| > I wonder how often the US consumer actually gets a VAT rebate
| on their imported purchases, or how many US consumers are even
| aware of this.
|
| It's quite unlikely they would have been charged VAT in the
| first place if buying online. The seller would have noted that
| the destination was not within the common market, and shown
| prices without VAT included.
|
| This mostly matters when you're physically in the EU when
| making the purchase but will leave the EU before using the
| item. In that case you can get a VAT refund when leaving the
| country. This tends to be well advertised both at the airport
| and at the stores that tourists are most likely to shop at.
| surfingdino wrote:
| VAT is a complex system that encourages fraud, which encourages
| expansion of tax collection and investigation forces. It is also
| treated differently from income tax. As any tax advisor in Europe
| will tell you, disparities in VAT reporting and payments/claims
| are treated with more suspicion by the tax authorities than
| similar issues with income tax. It is sometimes called a
| 'punitive tax', because the default behaviour of tax authorities
| is to fine you.
|
| The cost of compliance is also prohibitively high, even if you
| find an agent who will deal with various EU members' tax
| authorities, some (hello, France and Germany!) require suppliers
| to register and report/pay directly. It is a Byzantine system
| that's designed to stop growth, exclude small businesses, and
| entrap taxpayers.
|
| As a European, I would love for it to go to hell and never come
| back.
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