By Philip Blenkinsop
Brussels (Reuters) – US President Donald Trump says value -added taxes carry a lot of fault for a trade deficit almost a drill of American dollars with the rest of the world. The VAT 170 plus countries – including the main US trade partners in Europe – insist that they have no impact.
So who to believe?
It was highly billed in Trump's memorandum on February 13 on trade barriers it wants to address, listing it among the “unfair, differential or extraterrestrial taxes” imposed on US businesses, employees and consumers.
“The most damaging thing about it is that it is a double whammy,” one officer in the White House told reporters, complaining that it is being added on the border on US imports, while European producers get ad- VAT holdings when exporting to the United States.
“There is a reason why Germany sells us eight times more cars than we sell, and it is certainly not American craftsmanship or quality or anything else,” the officer continued.
Although that portrait of VAT – which has been a target for many US administrations – is relaxed, trade experts see scenarios where it could be argued to encourage trade.
The United States is in a small minority of 19 countries, including also Cuba, Malaysia, North Korea, Somalia, De Sudan and Yemen, with the so -called one -step selling taxes, which are just set once and are being Generally paid by end users.
VAT – as the name implies – is charged at the added value at every stage of the supply chain, such as from a manufacturer to consumer retailer.
This means that it is due on imports to the EU and elsewhere – unlike the United States, where sales tax applies only to the final transaction in the chain. This could prevent an importer of US goods that would be stuck with a VAT bill at the time their goods arrive.
However, Mairead Warren de Burca, Managing Director with Alvarez & Marsal Tax in London, says that many European countries allow importers to defer import of VAT payments, while Britain, Ireland, Belgium and the Netherlands have non -import systems payments VAT, so avoiding any cash flow.
In general, VAT import or offset can be recovered against VAT raised further down the supply chain, he said. Ultimately, VAT is collected on the final transaction, producing a similar sales tax result in the United States.
Double-Whammy?
The White House's 'double whammy' argument also targets the VAT exemption for EU exports. The EU says this is logical because it is a tax based tax.
But Washington has never actually bought this debate and has tried since 1971 to create income tax cuts systems for US exporters.