Word: vat
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Dates: during 1960-1969
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...issue are Europe's so-called value-added taxes, or VAT, a complex substitute for sales and excise taxes. Washington contends that VAT penalizes American exports and gives a substantial price advantage to many European goods shipped into the U.S. Concern has heightened since the U.S. foreign trade surplus shrank from almost $8 bil lion in 1964 to $726 million...
America's Burden. Under the VAT sys tem, companies at each stage of manufacture add a standard percentage of tax - 11% in West Germany, 12.5% in Denmark - to the difference between what they paid for the materials and the price at which their products are sold. Consumers ultimately pay the en tire levy as part of the price of almost everything they buy. In Paris, used car dealers drove through town last week in protest against the new 25% VAT "luxury" rate on their cars. In Amsterdam, a restaurant owner, cooks and waiters recently staged a mock funeral procession...
What worries Washington is that value-added taxes are refunded on exports and imposed as special border taxes on U.S. products entering European countries. That tends to add 6% to 23% to the prices of U.S. goods above and beyond import duties. VAT is sanctioned by the 21-year-old General Agreement on Tariffs and Trade, to which the U.S. subscribes. Under GATT rules, the U.S. can neither match such export subsidies nor raise similar import barriers because it relies chiefly on other forms of taxation. Except for excise taxes on a few items-autos, alcohol and tobacco...
Although France adopted the value-added tax in 1954, the U.S. grew seriously concerned only after the entire Common Market decided to copy it. When Germany made the switch to VAT last year, one immediate effect was a 2% drop in the export price of steel, machinery and other goods. The Netherlands introduced VAT Jan. 1 with similar results. Denmark and Sweden have joined the rush; Norway, Belgium and Italy will do so next Jan. 1, and Britain is considering VAT...
Europe's Advantage. The U.S.'s Committee for Economic Development, a group of top executives, argues that VAT should be considered as a partial replacement for corporate income taxes. Congress so far shows no inclination to consider such fundamental changes. In Geneva, American negotiators have been pushing for a sensible change in GATT rules to allow U.S. companies to receive export rebates based on corporate income taxes and other "direct" taxes. In his final economic message, President Johnson asked for Europe's help in revising the rules "so that they no longer give a special advantage...