- Trump claims value-added taxes (VAT) are responsible for the US trade deficit.
- 170+ countries, including major US trade partners in Europe, charge VAT and disagree with Trump’s claim.
- Trump’s memorandum lists VAT as an unfair tax on US businesses, workers, and consumers.
- The White House argues that VAT is a “double-whammy” because it is added at the border on US imports, while European producers get VAT refunds when they export to the US.
- Trade experts argue that VAT could discourage trade in some scenarios.
- The US is one of a few countries with single-stage sales taxes, while most countries use VAT.
- VAT is levied at each stage of the supply chain, while US sales tax only applies to the final transaction.
- Some European countries allow importers to defer VAT payments, and some have systems without import VAT payments.
- Import VAT is generally recoverable or offset against VAT charged further down the supply chain.
- The White House argues that the VAT exemption for EU exports is unfair.
- The EU argues that the exemption is logical because VAT is based on the place of consumption.
- The US has attempted to create income tax breaks for US exporters, but these have been challenged by the EU and ruled unlawful by the World Trade Organization.
- The difference in consumption tax rates between the EU and the US could be a concern for US businesses.
Source: globalbankingandfinance.com
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.
