On the VAT tax thing, compare the advantage to a federal income tax where the USA gets screwed. Assume no tariffs to keep it simple.
Company A (as in US of) has a tax on income made in the US. No (federal) sales tax. And No tax on income made and reported in some other country so long as those dollars stay overseas.
Country X has a VAT tax on anything Sold within it's borders. Even if made in country A, or B, or C...etc. (Probably some income tax on income made/reported in X as well.)
Company zzz makes widgets in country X, marks them up (way up) and sells to their US affialiate - thereby keeping almost all of the income in country X. Country A gets minimal tax benefit from the foreign produced widgets.
Company FFF also makes a widget, but in country A (as in US of A) and pays income tax to country A - And Also pays full VAT tax to country X.
Company FFF (and country A) is at a huge competative disadvantage. [Even before considering country X has higher tariffs on widgets, should that be the case.]
Whether the solution is a US (Federal) VAT tax, or "Fair" tax or Sales tax, or a tariff, is over my pay grade.
That argument ignores a few things.
Firstly, company FFF isn't paying a penny in VAT. The consumer pays the VAT, not the company. Not a single dollar of it flows from company FFF to country X. It is not a production cost, it is not a cost of doing business, it is a cost associated with the end consumer exercizing the privilege to buy an item. Hence, Country X consumers pay their own government. Money does not flow from country A to country X. Company FFF is simply required to charge the consumer for the VAT at the point of sale, then send that to the government. Company zzz also needs to do that to sell their widget in that country.
FFF pays country A income tax (tax on profits really, but we'll go with income tax) for income made in country A, and country x income tax for income made in country x. That's it. Country A sales tax they don't pay, the US consumer does.
By contrast, company zzz actually IS paying country X VAT. They are selling to 'themselves', the subsidiary, and so they need to charge 'themselves' for an output VAT. By exporting out of the country assigning the VAT, they become 'the end user' and are left holding the bag on VAT. As such, they're likely to do all they can to sell to the US subsidiary at the lowest possible price they think they can get away with without being done for tax evasion. To avoid paying their own government money for the privilege of selling their own product in a foreign market.
ZZZ pays country x corporate income tax, and country x VAT. Plus country A income tax for income made in country A through the subsidiary. Country A sales tax they don't pay, because just like VAT, it's paid by the US consumer, not the company.
Of course, given that corporate income tax is lower in the US than in the EU (by about 0.5% on average), they'll probably try and log as much of the income as they can to the country A subsidiary and pay the tax to that government rather than their own, because that means that the company overall pays less income tax. We all like that!
Overall, ZZZ pays their home country VAT for producing there, their own country for sales made at home, and the foreign country income tax for income made in the foreign market.
FFF by contrast pays their home country income tax on stuff sold at home, and the foreign country income tax on income made in their market.
On a country level, there is a big difference in how much each government collects from these sales, but only because corporation tax rates differ, and the rate at which the countries tax their own consumers differs.
You can complain that US sales taxes are lower than EU sales taxes, or that US corporation taxes are lower than EU corporation taxes if you like, because it does of course mean that the US gets less tax income from the sale of ANY widget in their market, no matter if it's made at home or abroad.
But once again, VAT is not a factor, or if it is, it simply serves as tax burden on the EU company trying to compete in the US with the domestic companies... I also don't think you really want the US government to accept this fact and raise US sales and corporation taxes to match EU ones... even if it would give the US a level playing field on trade.
Pretty Excel sheet again as it makes it easier for me to keep straight at least:
www.thesun.co.uk
