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August 18, 2008

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PM

So why can't US based firms sell to other countries and reap a higher profit from markets where the VAT artificially raises prices? Wouldn't most of what constitutes the VAT come back to the US based company as profit in such an environment? I assume that this does not happen because other countries won't allow it to happen, i.e. direct or indirect protectionism.

GM

PM,
US firms selling to other countries are subject to the VAT on those sales. The VAT is charged at the point of sale so, for example, if Ford exports a Mustang to France the VAT is added on when the friendly Frenchman writes the check to buy the car. Then Ford pays corporate income tax here in the US on profits from the sale of the Mustang.

By some estimates the US corporate tax rate is the second highest in the developed world. It amazes me we have any manufacturing jobs left in this country.

One thing that bothers me about popular discussion of this issue is that politicians make it sound like there is some sort of explicit job-exporting tax credit written into our tax code and that we need to repeal it and charge our domestic manufacturers more. This is not the case, it is simply that many other countries have tax codes better designed for competitiveness in a free market world.

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Very your comment about how confusing VATS are is very true. I like the post keep up the informative feedback. thanks!

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I think US companies involved in outsourcesing and outstaffing have lot good reasons do it. However I believe It should not be a source to reduce their total tax due. Thanks

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This article in my opinion illustrates why VAT will not become part of the tax system in the U.S.

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There are millions of small businesses that labor under the burden of filing federal tax returns each quarter of the calendar year.

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It is not appropriate or sensible but even so, the law is the law.

Anyway no one can complains about companies undergoing a place just because it optimizes and reduces the increases in transport (fuel trucks and everything else), employees, rent, etc..

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When businesses are moved to another country, the company's taxes are lower than the usual, they pay taxes in the country where the move their projects.

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