Senator Lindsey Graham has introduced legislation that would require the American government to negotiate fair border tax treatment for U.S. goods and services.
That has received applause from American manufacturers who say they have faced a severe disadvantage in the global market due to foreign border-adjusted taxes, including value-added(VAT) taxes.
American Manufacturing Trade Action Coalition Director Auggie Tantillo says “VATS” are everywhere except here, and the playing field needs to be evened. “All of Europe now has value-added taxes, all of Asia, China, Japan, Korea, India, Pakistan. Even our free-trade partners like Canada and Mexico have these taxes. But the United States has an income tax structure so it’s completely different.”
Tantillo says through value-added tax, many countries tax all imported goods coming in, and they use the revenue to give a rebate to their own manufacturers that export goods. “These taxes are not small, 15.5 percent on average and 150 countries have them.”
Tantillo says that the loss to American companies has been immense. “In terms of tax assessments that U.S. exports incurred last year through the value-added tax system combined with the rebates that foreign manufacturers got from their governments when they sent products to the U.S., that amounted to a $474 billion disadvantage to U.S. producers.”
France was the first nation to implement a small value-added tax, in the late 1940’s. That was two percent. Today the average rate is more than 15 percent and more than 90 percent of U.S. trade is conducted with countries assessing such taxes.