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Comment by kergonath | Hacker News Reader

> Can someone explain if there's any logic at all to counting a countrys VAT as part of its tariffs?

There is no logic. VAT isn’t tariffs and is not discriminatory. In the same way as trade imbalance is not theft. It’s just Trump trying to find reasons to complain and present the US as a victim.

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The only logic is that since the USA doesn’t have a VAT system, there is no way to do export VAT rebates.

> Export VAT rebates mean to refund the VAT paid in various domestic production stages to exporters. The purpose is to ensure that the prices of exported products are free of taxes in order to maintain a level playing field for international markets.

So that can’t exist at all for American exporters, since the USA doesn’t use VAT, their goods are taxed at a higher rate (as far as the exporters are concerned). It’s confusing, but Trump could have just asked for negotiations to get rid of this distortion.

Other thing is that when you’re VAT registered, as a buyer of parts you reclaim VAT on things you purchase as inputs. So the tax on the final product is what matters.

With US sales taxes you accrue tax all the way up the chain.

What?

Sales tax exemption is a thing when buying items for sale or materials for items for sale.

In many states in the US, if you go and buy materials, as a business, you pay a sales tax. There are exemptions and partial rebates, but there's nothing across all industries, and it varies by state. So if you were a farmer you might find you were exempt on fertilizer and tractors but not on a pickup truck.

That's different to a VAT, because there, as long as you're a registered business for VAT purposes, all purchases you make are exempt from VAT - either you don't pay it when you purchase and are invoiced by a business, or you can claim it back if you keep receipts. Companies have to register for VAT when revenue hits a certain amount; here in the UK it's £85k for e.g.

>either you don't pay it when you purchase and are invoiced by a business

As a business you pay VAT when you purchase. And you collect VAT when you sell. Then you pay to the government the difference between collected VAT and paid VAT. That's what the "Value Added" part means.

No, if you provide a VAT number, in business to business transactions, companies will not normally charge VAT in the first place, so you don't pay it when you purchase in many cases as a business.

However if you go into something aimed at consumers, and make a purchase, they're normally not set up for this, which is why you're able to reclaim when you have paid it.

This may be an arrangement set up in some jurisdictions and probably widely used nowadays.

The default (as in « the original setup ») is what i’ve described.

> So if you were a farmer you might find you were exempt on fertilizer and tractors but not on a pickup truck.

There are items that generate a non-deductible input tax in VAT countries (often entertainment items or cars). But usually, those will be the exception and deductible would be the default.

I'm not sure I follow. When I read the rules for Norway [1] it appear the importer (in Norway) pay the VAT on the imported goods (as opposed to the the seller for domestic a domestic business). But it's nothing that indicates that this amount payed does not enter the ordinary VAT accounting. Ie.: the amount payed will in effect simply be forwarded to the end-customer, just like domestic goods. I don't understand how a "VAT rebate" would come in play here?

> Export tax rebates involve the return of indirect taxes that have been levied on inputs used to manufacture goods that are eventually exported out of the country. These taxes can include VAT, ...

So this seems to be about imported goods being more expensive in US, not the other way around? Ie. if a US company import some product from Norway they have to pay VAT to Norway? And if they subsequently sell a derived product back to Norway they do not get refunded this VAT?

[1] https://www.toll.no/no/bedrift/import/importguide#merverdiav...

So let's say you make something in Europe, you pay VAT on the inputs, when it is sold to someone, they pay VAT, you take the VAT that the consumer paid and deduct the VAT you already paid to make the thing, sending the rest to the government, who only gets 20% on the thing, it doesn't get 20$ + 10% + 5% + .

You have to keep receipts of the VAT you paid to make the thing to do this, Europe doesn't like sloppy paper work, and rightfully so. Except...America doesn't have VAT, so there are no VAT rebates, they pay taxes on inputs and the consumer pays 20% on the finished item. But you are also right: if Norway exports a thing to the USA, they aren't getting a VAT rebate either from the sales tax paid on the thing in the states (or does Norway get a VAT rebate on things exported to non-VAT countries? I'm not sure).

But really, VAT is a better way, you avoid double taxation. The US should really just adopt it and make their VAT system compatible with Europe.

So that make short of sense, except according to this

"Selling goods to customers outside the EU

If you sell goods to customers outside the EU, you do not charge VAT. However, you may still deduct the VAT that you paid on related expenses, such as for goods or services purchased specifically to make those sales."

So the inputs are not more expensive to American importer. Yes the European company is compensated for the VAT they paid on an input, but this is a tax to begin with. Which the US companies not pay. So this is not unfair to the US company..

Or is there something I'm not getting?

I dont get it. VAT is end customer tax applied exactly once. The rebates exist so importers, suppliers, resellers, shops dont pay VAT multiple times. This applies to every product local or imported.

With special case of digital goods this for a looong time meant that software sold from outside EU over internet was around 20% (VAT) cheaper because VAT was ignored by the companies. That’s quite a big advantage especially for US. And a reason why EU wanted VAT to be applied equally. Many companies still ignore it but it’s illegal now.

I don't see how it's even possible to negotiate .

VAT countries apply VAT on all domestic transactions (and that includes imports). VAT countries do not apply VAT on exports because they _rightly_ assume that the importing country will apply VAT or whatever sale tax equivalent is in place in their territory.

This is not a distortion. There's really no other way to make it work.

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