Wall Street Still Finds Ways to Hire Foreigner

Wall Street Journal ^ | April 15 | Robin Sidel

[algernonpj]

“Maybe you want to recheck your math?”

.
You were correct I needed to check my math and be more specific.

VAT (Value Added Tax) is used to generate revenue for the national government in the countries in which it is used; it replaces part or all of the sundry taxes used to generate revenue for the national/federal government in the US.

The VAT is a direct tax on labor value added and capital value added. The ultimate burden falls on consumers, the purchasers of good and services.

So if the cost of raw materials, labor, and government are the same in a VAT using country and the US, say $100, and VAT = 15%,

Product A-EU manufactured in the EU, costs consumers in the EU $115. ($100 + $15 VAT)
Product A-EU manufactured in the EU, costs consumers in US $100. ($100 - $15 VAT)

The same product A-US manufactured in the US costs consumers in the US $115. ($100 + $15 sundry taxes)
Product A-US manufactured in the US costs consumers in the EU $~132.25. ($115 + 15% VAT)

There have been various attempts to level the playing field over time; to my knowledge, one by one they have been appealed to the WTO and the US has lost.

Say relief by US government is 5%,
Product A-US manufactured in the US costs consumers in the EU $~130.00. ($115 + 15% VAT – 5% relief)

In the US product A-US costs $115, product A-EU costs $100 – an inherent 15% disadvantage for the US manufacturer.
In the EU product A-US costs $130, product A-EU costs $100 – an inherent 30% disadvantage for the US manufacture.

[Toddsterpatriot]

Thanks for the correction. EU countries also have corporate taxes, although they are lower than our 35% rate.

it replaces part or all of the sundry taxes used to generate revenue for the national/federal government in the US.

More like it's layered on top of their "sundry taxes".

In the EU product A-US costs $130, product A-EU costs $100 – an inherent 30% disadvantage for the US manufacture.

Still wrong. In the EU, the VAT would make their product $115. And it's wrong to add corporate tax to our product and not to their product.

[algernonpj]

“In the EU product A-US costs $130, product A-EU costs $100 – an inherent 30% disadvantage for the US manufacture.”

.
I am a far too optimistic proof reader. Should read:
“In the EU product A-US costs $130, product A-EU costs $115 – an inherent $15 disadvantage for the US manufacture.”