Yes, you keep making this assertion about "tax relief", but you have yet to provide a concrete example of it. (Other than the ludicrous claims about EU exports being exempt from corporate taxation.)
Here is another one
Caterpillar (US) manufactures construction equipment and exports to Germany
Liebherr (Germany) manufactures similar construction equipment and exports to the US
When producing a bulldozer in Germany, Liebherr pays 19% VAT on all components and services (steel, electronics, labor, etc.). When Liebherr exports the bulldozer to the U.S., Germany fully refunds the 19% VAT. This lowers Liebherr’s export price by 19%. Liebherr sells the bulldozer tax-free in the US. The only tax applied is the US. state/local sales tax (6-10%), which is much lower than 19%. Liebherr bulldozer is now more price-competitive in the US. than Caterpillar’s
This is called a trade imbalance
In your new example, Caterpillar pays state/local taxes for their sales to the US, corpirate taxes to the US, and no VAT to the EU. Liebherr pays state/local taxes for their sales to the US, corporate taxes to the EU, and no VAT to the EU. Where is the imbalance?
There's no export subsidy here, hidden or otherwise. Everyone is on a level playing field.
You could do the same exercise on US exports to EU vs. domestic production in the EU, and it'd likewise show that there are no artifical barriers to imports to the EU
> This lowers Liebherr’s export price by 19%.
No, it really doesn't. The export price is exactly at the level it would be if there were no VAT at all.
> Liebherr sells the bulldozer tax-free in the US.
Tax-free other than all the taxes they paid.
You are correct that that all companies pay corporate taxes. We have established that.
VAT is already baked into the cost of production at every step in a VAT-based economy. If VAT were not refunded, that 19% tax cost would be included in the price, making the bulldozer more expensive abroad. Technically, VAT refunds are not an "export subsidy" in the traditional sense (where the government directly pays companies to export). BUT, the effect is the same as a subsidy and it removes tax costs from exports, giving VAT-based economies a competitive advantage. The US does not provide tax relief for its exporters and does not impose VAT on imports.
"Everyone is on a level playing field"
Wrong. The US does not refund taxes on exports, while VAT countries do
When you are ready to understand that part let me know.
It does. Exports from the US are exempt from sales tax, the same way others exempt their exports from VAT. Neither side pays domestic consumption taxes on exported products, and both sides charge consumption taxes equally on all domestic consumption, no matter where the products were produced.
Both American and European products cost a little more in Germany due to 19% VAT, and both cost a little less in the US due to 7% sales tax. Nobody gets a free ride.
Nevertheless, in some scenarios, sales tax can indeed cascade and be charged multiple times during the manufacturing process, so even if it's not charged at the final step, there's still a component of it in the final price to the buyer.
This is not a hidden tariff by other countries against US products. Other countries have no control over this. The US government simply sucks at taxation because it has not transitioned to VAT, and products cost more to manufacture than they would have under a better tax system.
Trump shaking more money out of US consumers with new taxes on imported products does nothing to fix the issue. As the article points out, domestically produced and consumed products suffer from the same problem.
https://www.quora.com/Why-does-the-US-not-have-a-VAT-or-nati...
Let's follow your example more closely.
Caterpillar manufactures a bulldozer in the US. The price tag for the bulldozer is 200k. When sold to domestic customers, a 7% sales tax is charged by domestic authorities, and the bulldozer ends up costing 200+14=214k for the American buyer. When exported, no sales tax is charged due to the export exemption. The bulldozer arrives in Germany, where German tax authorities charge 19% VAT, as they do on all sales. The bulldozer ends up costing 200+38=238k for the German buyer.
Liebherr in Germany manufactures a bulldozer too. The price tag for the bulldozer is 200k. When sold to domestic customers, 19% VAT is charged by domestic authorities, and the bulldozer ends up costing 200+38=238k for the German buyer. When exported, no VAT is charged due to export exemption. The bulldozer arrives in the US, where US tax authorities charge 7% sales tax, and the bulldozer ends up costing 200+14=214k for the American buyer.
In either case, the American buyer gets a 200k bulldozer for 214k, and the German buyer gets a 200k bulldozer for 238k, regardless of whether it was domestically produced or imported. The difference in the total cost to the buyer is due to differences in local tax rates and not unfair trade rules.
The US government does not charge consumption taxes on a Caterpillar exported to Germany, so both are priced at 200k before taxation in Germany. The German government charges its 19% consumption tax equally, regardless of where a bulldozer was made, so both end up costing 238k for the German buyer.
There is approximately a $109,455 price advantage for the German company in global competition
Liebherr's bulldozer is also more expensive in Germany, because Germany taxes both sales at a higher rate than the US.
Nobody gets an advantage from this. American buyer pays 7% tax and German buyer pays 19% when they purchase a bulldozer, regardless of where it came from.
I made a small table to illustrate it:
+-----------+------------+-----------+----------------+------------+
| Direction | Base Price | VAT (19%) | Sales Tax (7%) | Total |
+-----------+------------+-----------+----------------+------------+
| US -> US | 200 000 | - | 14 000 | 214 000 |
| G -> US | 200 000 | - | 14 000 | 214 000 |
| G -> G | 200 000 | 38 000 | - | 238 000 |
| US -> G | 200 000 | 38 000 | - | 238 000 |
+-----------+------------+-----------+----------------+------------+
Sadly if this was Biden this wouldn’t even be an argument.