The Indicator from Planet Money The spat over VAT
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Apr 15, 2025 Explore the ongoing debate over value-added tax (VAT) and its implications in international trade. Delve into the differences between VAT and sales tax and how these tax structures affect consumers. Discover how VAT influences European manufacturers' competitiveness versus U.S. producers. Learn about export subsidies and their role in shaping trade deficits. Additionally, examine the complex impact of tariffs on the U.S. economy, balancing national security concerns with potential downsides like increased consumer prices.
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VAT Explained
- Value-added tax (VAT) is a consumption tax, similar to sales tax.
- It's a multi-step tax applied at each stage of production, ultimately paid by the consumer.
Level Playing Field
- Both VAT and sales tax apply equally to domestic and imported goods.
- They don't inherently favor domestic products or create trade barriers.
VAT Rebates on Exports
- French chairmakers exporting to the U.S. receive VAT rebates.
- This is standard practice as VAT applies to domestic consumption, not exports.