Well from peer comments and examples it seems like the difficulty is that a car company will have to pay VAT on the full value of the car if it is imported, but only end up in net paying VAT on the portion of value that they added if they didn't import the car. Wouldnt it be more fair to just charge VAT on the value that the importer is adding, rather than the entire value? I suppose they would if they could but its impractical for international trade.
It seems like most people in this thread are just using it as an opportunity to shit on Trump but I have yet to see an explanation for why this argument is dishonest. The effect of the VAT seems pretty tariffy.
>Wouldnt it be more fair to just charge VAT on the value that the importer is adding, rather than the entire value? I suppose they would if they could but its impractical for international trade.
They don't pay anything. They collect the tax paid by consumer which is N percent of the price. If N - 1 was already collected by previous parts of the chain, they only have to collect 1.
"Value added" is bit misleading. As it indicates point where taxation events happen when it is inside market. But in reality it is purely a consumption tax.
And well with imports value add happens at the border, where magically a car for example appears. So value addition of whole car's value is done. From zero to cars value in added value.
They are two separate things. There is a flat VAT on every consumer product in the EU. When I buy something in Denmark from a Danish (or any EU) shop I pay 25% to the government. If I buy something from a non-EU shop I pay 0% to the government until it gets dutied in customs and then I pay the 25%. In America you also pay taxes on goods, the difference is you have to add it on top of your price yourselves... Like that was so crazy shopping in a US store the first time... that the price listed was not the price you had to pay. I don't think it would be particularily unfair for the US to do the same, but the difference is that you don't have the 25% flat vat on your internal goods, so in order for it to be equal we would need to add a tax on US goods to balance it out.
Anyway, taxation on car varies from EU country to EU country. In Denmark you pay a ridiculous amount of money to get a car registrered. To prevent every Danish person from buying a car in Germany we tax imported cars equal to Danish cars. Then on top of that you have various enviromental taxes, which our local car dealers are obviously geared toward, but if you were to import some non-eco friendly car your taxes on it would be silly high. (I say ridiculous and silly but I agree with it). The flip side of this is that some vehicles (like Teslas) have been getting very large tax reductions because they are green. Here is the kicker though, these are for private imports. If a Ford dealership wants to sell American cars, they can do so on equal terms to European car companies. You can argue Trump is at least a little correct on cars, but the reason Danes do not buy American cars is because American cars aren't build for our roads. Somewhat ironically a lot of the countries which have the highest taxes on imports of cars are also the countries which don't produce cars. America can tax the EU sky high on cars and it wouldn't impact Denmark because we produce exactly 0 cars. It would impact Germany, which has much lower import taxes than us and is also where a company like Tesla produces the European cars which are sold in Denmark. Something which would likely be a target for EU retaliation.
The worst part is probably that it'll mainly impact smaller businesses. Our biggest exporter of anything to the US is Novo Nordisk but companies like them have production inside the US and will not be impacted by the tariffs. Mean while some specialist tiny store will likely lose a lot of money. I have a pair of Iron Ranger boots as an example. I guess Red Wing might not be a tiny company, but they don't have EU production so I would find a non-american alternative to these if we enter a trade war and there is another 15-20% added on top of the VAT to balance things out. Not that I'll need a new pair of boots for a while, but you get the point.
The reality is that if we enter a trade war, we will both lose. The Trump administration is gambling that they can pull production back to the US, and maybe they'll succeed better than Australia did back in the day. The US is certainly a big enough economy that it might be capable of doing it. It's far more likely that it'll surrender the global economic leadership to China though. It's tricky of course, because China would already have that if they decided to meet EU regulation on safety standards. The danger to the US is if BRICS manages to pull half of the world away from the dollar. If that happens there will be nothing to carry the massive US deficit, and the US is the first and only nation in the history of the world that has been capable of remaning dominant while also having a deficit. Which is solely thanks to the dollar being the world currency.
It seems like most people in this thread are just using it as an opportunity to shit on Trump but I have yet to see an explanation for why this argument is dishonest. The effect of the VAT seems pretty tariffy.