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Comment by nachomg | Hacker News Reader

This doesn't make any sense.

European companies pay VAT in Europe. American companies pay VAT in Europe. European companies do not pay VAT in US. American companies do not pay VAT in US.

Where is the unfair competition?

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I'm literally quoting you:

> "American companies pay VAT in Europe. European companies do not pay VAT in US."

VAT is a significant income stream for the EU. They take that money and re-invest it into their economy in an uncompetitive manner, whilst constantly propping up more anti-competitive regulation (which harms American businesses).

Have you looked at EU countries budgets? We "invest" in social security and public health systems. Our defense budgets go in large part to buy arms from the US, and Musk complains if we decide to prop up Arianespace for some defense satellites while threatening to cutoff Starlink for Ukraine paid by Poland. Have you looked at how much money your DoD sends abroad (and how much of it is pork)? You're literally telling us to be more protectionist, and then expect something different.

I don't really care what you invest the money into, the point is that the VAT is a mechanism which messes with the concept of a free global market and it leads to unfair competition and an unleveled playing field. If you combine it with other factors (such as the fact that the US is the sole guarantor of Europe's defense) - the US is in the right for challenging the European economy.

We tax consumers, actual people, where they actually live, on what they consume, to fund the public services they benefit from.

Why would that be a market distortion!?

You're welcome to stop funding our defense. Just don't expect us to continue to fund your arms industry when you tell us to buy additional weapons.

American companies pay VAT in Europe. European companies pay VAT in Europe.

American companies do not pay VAT in in the US. European companies do not pay VAT in the US.

American companies pay sales tax in the US. European companies pay sales tax in the US.

US sales tax is *significantly* lower than VAT, varies by state (allowing for all kinds of loopholes), and applies to fewer categories of products and services sold. No point arguing this, VAT is a protectionist and anti-competitive tax and the US has a right to challenge it.

Why are you arguing this point? It’s de-facto cheaper and easier for European companies to compete in the American markets, than the other way around.

How is it protectionist if the European companies also pay it?

You are arguing about rules that apply to all companies competing in Europe and then extrapolating that to say that “American companies competing in Europe” are mistreated.

Are you saying the VAT doesn't benefit Europe and European economies (both directly and indirectly)?

I’m saying the VAT is not protectionist.

We started this conversation with you seemingly not understanding how VAT messes with free trade, and it sounds to me like you're in a different place now. Feel free to keep arguing over semantics all day long, I'll leave it at that.

My place hasn’t changed at all. Everything I’ve said is internally consistent. You are welcome to view any form of taxation as an impediment to “free trade” but that’s not how competition works. Feel free to continue believing that taxation is inherently protectionist, I’ll leave it at that.

There's "taxation", and then there is "taxation". VAT is an incredibly aggressive and overreaching version of "taxation", and it has severe implications on free trade with Europe. I'm not sure why you won't acknowledge this.

And by the way - plenty of economists view taxation as impediment to free trade.

I’m not sure why you won’t acknowledge that a tax that affects domestic and foreign companies equally is not protectionist. But here we are.

I’m not saying that taxes don’t have an impact on the economy, or the business environment, or growth, or profits…of course they do! Maybe the tax will lower demand which makes investment less appealing, and so less investment from Americans happens as a result. But there's also less investment from the Europeans in that case! And most of all, it has nothing to do with the competitiveness of American products in the European market, because the European products face the same tax. VAT does not distort the relative price between European and foreign products.

If you want to say that tax revenue is used for subsidies that are anticompetitive — well money is fungible, you can’t blame that specifically on VAT revenue, and you should be making an argument against subsidies, not the VAT. But then you will need to address the many ways in which the US subsidizes its own industries.

Have a good day!

If I read you correctly you're saying that a tax imposed on the consumers in a country benefits the country as a whole and thus aslo the companies operating in that country, which make it unfair to foreign companies? Is that really what you're arguing?

How is it easier for the European companies to compete when the US companies have the same conditions?

Not everyone is an expert in this field. If you are, I'm sure you can provide a more understandable explanation.

It's not obvious to me that the different rates of sales tax/vat matter for competitio either. An example is worth thousand words here...

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