By Philip Blenkinsop
BRUSSELS (REUTERS) – US President Donald Trump says that added value taxes are faulted for the trade deficit of the nearby trillion dollar with the rest of the world. The 170 -plus countries that charge VAT – including top American trading partners in Europe – insist that they have no impact.
So who to believe?
VAT received a high invoicing in Trump’s Memorandum of 13 February about trade barriers that he wants to tackle, with a mention of the “unfair, discriminatory or extraterritorial taxes” imposed on American companies, employees and consumers.
“The most pernicious thing about the VAT is that it is a double WHAMMY,” said an official of the White House reporters who are complaining at the border on the entry of the US, while European producers receive VAT returns when they go to the Export United States.
“There is a reason why Germany sells us eight times more cars than we sell, and it is certainly not an American craftsmanship or quality or anything else,” the civil servant continued.
Although that display of VAT – which has been a target of many American administrations – is disputed, trade experts see scenarios in which it can be claimed that trade discourages.
The United States is located in a small minority of 19 countries, including Cuba, Malaysia, North Korea, Somalia, South Sudan and Yemen, with what is known as a single-stage sales tax, which are just once imposed and in general paid by Final consumers.
VAT – as the name suggests – is levied on the added value in every phase of the supply chain, such as from manufacturer to retailer to consumers.
This means that it is due to imports for the EU and elsewhere – in contrast to the United States, where sales tax only applies to the final transaction in the chain. This could scare an importer of American goods that is stuck with a VAT account when their goods arrive.
Miread Warren de Burca, director of Alvarez & Marsal Tax in London, says that many European countries enable importers to postpone VAT payments, while Great -Britain, Ireland, Belgium and the Netherlands have systems without VAT payments cash flow.
Import VAT can generally be repaired or compensated against VAT that is loaded further into the supply chain, she said. Ultimately, VAT is collected in the final transaction, which results in a similar result as a sales tax in the United States.
Double Whammy?
The ‘Double Wammy’ argument of the White House is also focused on the VAT exemption for EU export. The EU says this makes sense because it is a tax based on the location of consumption.
But Washington has never really bought this argument and has sought since 1971 to create income tax break systems for American exporters.