The Trump administration is confused about European VAT taxes. Right here is how they work
It is going to be attention-grabbing to see what the Trump administration at the moment says about European VAT taxes, which appear to be a spotlight of a number of administration officers together with Peter Navarro.
That pondering is inflicting confusion as a result of these are primarily consumption taxes.
In any case, the Tax Basis is out with a worthwhile learn explaining how European VAT taxes work compared to US gross sales taxes.
Two eventualities as an example.
US export to Germany:
- Ford manufactures a automobile within the USA and exports it to Germany.
- When the automobile arrives in Germany, German VAT (e.g., 19%) is utilized at importation.
- A German shopper buys the automobile and pays the 19% VAT, identical to they might for a German-made automobile.
German automobile bought in Germany:
- BMW manufactures a automobile in Germany and sells it domestically.
- The buyer pays German VAT (19%) on the BMW.
That is well-understood however for some purpose the Trump administration sees it as a tariff, although it may all be posturing to arrange a transfer to tax German automobile exports.
This text was written by Adam Button at www.ubaidahsan.com.
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