The trade war can be easily finished? Economists with bank Peako believe that “there is another instrument known to economists that can solve several US problems in one go.” Speech, among others on the fiscal and commercial deficit, the loss of the industrial base and position in the global economy for China and uneven commercial relations with other trade partners. “We suggest that the United States introduced VAT modeled on other countries Organization of Economic Cooperation and Development (OECD)” – they write on an economic service. VAT accounts on average over one -fifth (20.8 percent) of the total tax revenues of the OECD countries.
Why will the US benefit? Economists exchanged as many as seven reasons that could work in favor of the United States:
- “The current American government believes that it is treated unevenly by other countries due to their imposing VAT on goods sent there from the USA, it is the introduction of analogous tax in the USA Equalize the game field” – they write. Goods would be taxed in the same way regardless of the country of origin and the place of taxation, and exporters could receive a tax refund.
- Americans would come to terms with their trading partners and could build A common front against China.
- VAT would lift permanently Income of the federal government by 7 percentage points GDP. “In the first year, of course, there would be a temporary decrease in consumption and activity, but ultimately it would be a revolution in American public finances,” add economists.
- The trade deficit would decrease. “If Americans consume too much, and they save too little and have to use savings abroad, VAT would correct this feler quite effectively,” we read.
- Taxes would be lowerand the system is better in terms of savings and investing. “The introduction of the VAT, which has a wide base and is neutral for economic activity, would probably give space to reduce other taxes, e.g. Citu or Pitu, and the implementation of some election promises of President Trump” – explain economists.
- “VAT could replace a kaleidoscope of state and local sales taxes, which do not bring large influence, but have a more unfavorable structure for economic activity, “PEKAO continues.
- Impuls to modernization of government administrationincluding tax. She could include “recruitment of qualified clerical staff, creating payment and analytical systems”.
The USA does not have VAT: In the United States, so -called Sales Tax (sales tax). It works at a state and local level, but not federal. It is an important part of the budget of most states – approx. 32 percent income. Importantly, each state decides about its height, which causes noticeable discrepancies. For example, in Louisiana it is at 10.12 percent, and Wisconsin is 5.7 percent. In addition, there are local taxes in 38 states, which are often higher than taxes state. In five states, sales tax is not valid. The US is one of the few countries where there is no VAT. This group includes Kuba, Malaysia, North Korea, Somalia, South Sudan and Yemen.
What is the difference between VAT and American taxes? First of all, sales tax is charged only at the final stage of retail sales. It is only paid when purchasing goods or service. However, VAT is charged at every stage of the supply chain. This means that It is paid by suppliers, producers, distributors and retail sellers. Unlike sales tax, it is nationwide.
Donald Trump and VAT: The American president signed a memorandum in which he described VAT as “unfair, discriminatory and extraterritorial tax.” – It is a double load for American goods and an unfair advantage for European exporters who are released from VAT when exporting to the USA – he said. In turn, on the Truth Social platform, he wrote that VAT is “much more repression than customs“.
Read also: “They checked the system and couldn't believe. Trump hit students. Quietly“.
Sources: Pekao, Reuters, Donald Trump [Truth Social], OECD, Tax Foundation