by dzogchen on 2/15/25, 9:20 PM with 379 comments
by cjs_ac on 2/15/25, 9:35 PM
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.
by MoonShot7 on 3/1/25, 4:21 PM
by MaxGripe on 2/15/25, 10:10 PM
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.
by devuo on 2/15/25, 9:37 PM
by jimnotgym on 2/15/25, 11:38 PM
by grg0 on 2/15/25, 9:57 PM
by vages on 2/15/25, 9:31 PM
by Ekaros on 2/15/25, 10:59 PM
But if I import something myself I need to pay the VAT (and possible tariffs) on the price I paid and shipping. And the handling that posti here charges... So in the end I am paying it.
Ofc, making your customs to handle each package separately each time is sub-optimal so with large enough entities there is more automation and rules. But still I am one that pays for it as consumer.
by Taniwha on 2/15/25, 10:09 PM
by lucasyvas on 2/15/25, 9:58 PM
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.
by dboreham on 2/15/25, 11:09 PM
by grumblingdev on 2/16/25, 10:34 PM
If my product costs $73 to make, then I make $10 profit, and the government earns $17.
The government then spends this $17 to the benefit of the citizens of that country.
The tax burden either falls on the producer or the consumer depending on price elasticity of demand.
High elasticity would result in the producer needing to absorb the VAT.
But high elasticity for individual products usually results from increased competition.
But if there is not much competition, and elasticity is still high, then the company's profit margins are being eroded by the tax, with a greater share going to the government.
If the average price elasticity of demand for imports is higher than domestic production, then one could argue this is not fair.
Also, each EU country has certain discretion over how to charge VAT for groups of products so there is the potential for unfairness and tariff like impacts.
But I will admit that it is a difficult case to make that a consumption tax is discriminatory.
by bitshiftfaced on 2/15/25, 10:31 PM
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.
by 4ndrewl on 2/15/25, 10:13 PM
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.
by ltbarcly3 on 2/15/25, 11:28 PM
by diegocg on 2/15/25, 10:30 PM
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
by daft_pink on 2/16/25, 3:50 PM
by markhahn on 2/15/25, 9:57 PM
by gotoeleven on 2/15/25, 10:22 PM
>>>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.
by bikson on 2/15/25, 10:05 PM
by bigbacaloa on 2/15/25, 10:24 PM
by rayiner on 2/15/25, 10:24 PM
That seems pretty significant no? Why do we need German cars anyway?
by firesteelrain on 2/15/25, 11:32 PM
VATs offer an unfair competitor disadvantage for US companies engaged in international trade.
US relies primarily on corporate and income taxes. This creates an asymmetry in taxation that affects trade. When US companies sell goods abroad, they don’t get a tax refund because the US has no VAT.
Trump is partially right that US companies face an additional tax burden that foreign companies avoid which he essentially equates to a hidden tariff.
But because the US does not have a similar VAT system then it puts the US at a disadvantage.
We can debate the wisdom of reciprocal tariffs but he clearly wants production brought back here and for Europe and other countries to stop taking advantage of the US. So he is taking measures he believes will address that.
by coolgoose on 2/15/25, 9:41 PM
Going to add TLDR for people: Vat applies to all shit on the market, regardless of where the fuck you produced it.
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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.
by ReptileMan on 2/15/25, 10:08 PM
by seydor on 2/15/25, 9:37 PM
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.
by alexey-salmin on 2/15/25, 10:06 PM
This isn't even remotely true
by rattlesnakedave on 2/15/25, 10:57 PM
by surfingdino on 2/15/25, 10:33 PM
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.
by surfmike on 2/15/25, 9:30 PM
> 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.
by jujube3 on 2/15/25, 10:18 PM
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.