- The US government will impose “reciprocal taxes” on April 2, 2025, to address what they consider unfair tax practices by the EU.
- The US believes the EU’s VAT is a penalty for US businesses, almost like a tariff, because it disproportionately affects goods from outside the EU compared to those within the common market.
- The US also argues that the EU’s VAT rates are higher than the US sales tax.
- The EU’s VAT is fundamentally different from the US sales tax.
- The US sales tax is a single-stage tax applied only at the point of consumption.
- The EU’s VAT is a multi-stage tax levied in stages throughout the production chain.
- EU businesses apply the VAT but are entitled to deduct the tax paid on purchases, regardless of whether the goods are imported or from within the EU.
- Consumers always pay the VAT, regardless of the origin of the goods, but the amount varies depending on the product.
- This mechanism ensures the tax is neutral.
- While the EU’s VAT is applied to imports, it is not equivalent to a tariff.
- Tariffs only apply to imported goods, while VAT applies to both domestic and imported goods.
- The US argues that EU exports to the US are eligible for VAT refunds, while US exports to the EU are not, which they see as a political advantage for European businesses.
- This is a consequence of the EU’s VAT system and its differences from the US sales tax.
- EU businesses are entitled to deduct VAT on their operations.
Source: eutekne.info
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
