300 prices in Europe

I know roughly how it worked and in some cases, a tourist can get a refund
after paying a VAT and taking an item out of the country. The proposal to
replace our US income tax with a VAT is not mine but comes from the
"everything the government does is bad" fringes. Unfortunately thoses
fringes seem to be getting their way these days.

 

Unfortunately in the US some people think that the federal income tax should
be replaced with a VAT. Those are mostly the same people who think that
investment income should be tax free and tax on labor should make up the
difference. Unfortunately those people seem to be winning these days.

 

Just like you can get North American sales tax back on the export of some
items. Recently I was very (pleasantly) surprised I could get a tax refund
on my hotel room costs when leaving Toronto. I am pretty sure the
equivalent on leaving the EU is not possible.

DAS
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For direct contact replace nospam with schmetterling
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[...]

 

Generally you can get VAT refunds when leaving a country that levies VAT.
Most airports have VAT reclaim places where you take your paperwork. It
normally has to be hand-carried goods (so they can see you really took them)
and there is normally a minimum below which you can't claim.

It used to be true in the US too, though it was a non-charged item rather
than a rebate. I got it removed from an sale of a car radio into a Canadian
registered car. I think it is because technically it should only be levied
on residents of the state. With a more mobile populace these days, I wonder
is that is still the legal position. You know when buying goods over the
internet or mail order, sales tax seems to be charged normally only if
delivery is to the same state as the distribution point.

 

In basic form a VAT differes from a sales tax in one way. Each step in the
life of a product is subject to the VAT tax. Production or import; assembly,
distribution, wholesale sale, retail sale. This can add up quickly. In the
States all web sales are not taxed, although some states would like the
consumer to pay sales tax on their own (that is not going to happen).

Social impacts aside, I believe the absence of a VAT style tax in the States
is one major reason why it is so easy to introduce new products and
technologies here and why it is only left up to mature large companies in
VAT countries. (gross generalization).

Richard.

 

Actually in the States, most states now impose a "use" tax when stuff is
bought outsides its borders. So if I, in NC, buy a computer from Texas and
the Texas company does not charge me NC sales tax, when I do my NC tax
return I am supposed to report the purchase and pay the use tax which is the
same percentage as the sales tax.. They also have a "safe harbor". It is
an average amount you can pay based on your income instead of keeping track
of everything you buy out of state. I have no idea of the level of
compliance. I may be the only one in NC paying the use tax.

 

I think you could reclaim the VAT on leaving any EU country and pay the VAT
in the final arrival EU country, though you would get your refund only when
you have proved you paid the next VAT. However, we now have the practically
free unlimited movement of goods for personal use, so if VAT is paid in the
country of purchase no VAT has to be paid in the country of arrival. Thus
it becomes a pain in the butt to go through the rigmarole of refunds and
payments.

For what it's worth, cars and certain other vehicles (aeroplanes, e.g., I
think) are an exemption from these general regs. I suspect that's because
the capital values become interesting enough to start playing the low
end-price game.

For example, in 2001 I took delivery of my car, having paid German VAT at
16%. I drove it to Britain, paid 17.5% and got my 16% back from the German
authorities.

Of course the paperwork isn't just dealt with at airports but at any port of
exit/entry -- i.e. including road and sea borders points. I can't remember
whether I had to have my docs stamped on leaving Germany, but basically I
had to send in my confirmation of UK tax paid; I had about a week in which
to do it.

In 1982 (used car) and 1986 (new) I did something similar but in those days
it was much more bureaucratic and I had to pay the then VAT on arrival at
Dover.

DAS
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For direct contact replace nospam with schmetterling
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Am not sure how VAT "adds up quickly" as every processor claims back VAT.
In effect only VAT is paid on the end price to the final consumer.

Every country is different on the detailed administration. Small businesses
in the UK can have special deals with the authorities to pay fixed amounts
independent of the actual. My little business is registered for VAT and I
do a quarterly return. As my affairs are fairly straightfoward I have set
up a spreadsheet from which the numbers required for the form pop out.
Other businesses don't have it so easy, of course.

I usually wind up with a refund as my expenditure is in the UK but my income
is deemed to arise largely from outside the EU (I get commission and fees
mostly from non-EU companies)


I fail to see what a VAT-style tax has to do with the degree of innovation.
Who has analysed that and put forward reasons (other than Richard, of
course)?

DAS

 

Within the EU the UK rate of VAT on cars (17.5%, same as on just about
everything else on VAT is levied) is not particularly high, even if it is
high by US standards.

It is true that tax has been levied on cars even before VAT. Was it not 25%
("Purchase Tax") on the ex-factory price? I don't recall if the additional
10% on cars were also applied then.

DAS
--
For direct contact replace nospam with schmetterling
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[..........]

.......................

 

Climate makes a big difference. Our subdivision roads (the ones that are
20+ years old) are in just as bad a shape as the main roads, often worse.
I've got potholes and cracked pavement in the street in front of my house.
The entire neighborhood has bad concrete -- even the sidewalks are all
broken up. Nobody's driving anything heavier than a bicycle on the
sidewalks.

And this is no slum, mind you, it's a < 25 year old neighborhood with houses
that sell in the high $180s to low $200K range. It isn't some 75 or
80-year-old neighborhood that has never been maintained. The place is
fairly well kept.

Freeze/thaw cycles + poor maintenance = bad roads. Also: Bad concrete to
begin with + freeze/thaw cycles = bad roads. It can happen in situations
with only foot traffic.

--Geoff

 

My understanding of how the Classic form of VAT works is this. You make a
raw material, you paid a VAT when you bought the products to make the raw
material. When you sell the raw material the buyer is charged a VAT. When
the raw material is made into a part the buyer is charged a VAT. When the
various parts are bought by a factory to make a finished product the VAT is
paid by the distributor. When the distributor provides the product a VAT is
paid, and when the retailer sells the product the VAT is charged at retail
to the end user. If this is not how it works in the UK and elsewhere then I
am wrong. In the States an income tax is all that may be charged along the
way, and the retail consumer may be charged a sales tax (no US sales tax),
by the local government. Even then, many products are exempt by local law.

Just look at your retail prices for products such as wide screen digital
HDTV's, DVD players, etc., and you will likely find that the = product in
the States can be found for a lot less. How about $49.00 color TV's and
$29.00 DVD players from China. If you pick one up on e-bay or a net seller
there is no tax.

Also, a check of the tax returns of the elected leaders of the USA shows
that none of them agreed to pay any sales tax for net purchased items.

Richard.

 

Richard, I don't know whether some of the posts have not arrived at or been
deleted from your server, but if you have all the mesages I can see and you
made the effort to read them, it has been stated at least twice that, while
tax is levied at every stage, there is a refund at every stage except at the
end.

Thus X% tax means X% tax, not some compounded figure.

The reasons for the higher prices for certain items in Europe vary across
the items and across countries.

To take one specific example where I did some research a while ago: a fairly
decent Canon SLR camera. I checked in Singapore (very low sales tax) and in
two places in the USA. The two places were quite different and the dearer
one was within shouting distance of the UK. Singapore was lower approx by
the VAT amount, which makes sense. Still wasn't worthwhile because of
potential warranty issues.
I also checked out an expensive lens at Singapore airport. Cheaper in UK
because, presumably, the volume for this item was low at the airport.

Another one was a computer printer I (almost) bought in NYC. I needed a
small printer while visiting New York a couple of years ago or so. As I had
an afternoon free I thought I would potter down to the nearest computer
superstore (Compusa, was it?) and maybe even save some money cf UK. To cut
a long story short, by the time the manufacturer's international warranty
was added the price was similar to the UK's (where we get international
warranties on many items -- e.g. my new Toshiba M100 notebook -- 3 years
anywhere, rather useful as I travel quite a lot, also outside the old EU
countries -- EU border moved east on May 1).

But on another occasion I took a chance and bought a video recorder at Dubai
(no European guarantee) -- that was a bargain cf UK and has worked perfectly
for years, admittedly at low levels of use.

DAS

 

Dori, I don't know anything about taxes in the UK. But a Value Added Tax, by
its classic definition, means that the value added by each step in a
products production, distribution, and sale is TAXED. All your discussion in
this string has been about refunds for taxes paid at the final retail end of
the process. If that is all you tax in the UK than it is a classic sales tax
and not a VAT. We have the same deal in the States. If I buy a car in NJ and
pay the sales tax, and then register it in NYS, NYS credits me with the tax
I paid to NJ.

Also, if you went into a store in NYC and they offered to sell you hardware
that would work in the UK with an international warranty, you were not in
CompUSA or any other legit retailer. NYC is full of shops selling goods to
the unknowing foreigner that are overpriced gray goods intended for foreign
markets. They are not brought in by legit importers. Next time you visit the
city e-mail me for some tips on where to score a good deal on export
hardware. If you know where to look NYC has some of the lowest prices in the
world. But you had better know what you are doing or you will be taken to
the cleaners.

Richard.

 

See below.

DAS
--
For direct contact replace nospam with schmetterling
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FROM DAS: No. Refunds are obtained at every stage except at the end. If
you are in a hole, stop...
As has been stated almost ad nauseam, taxes ARE levied at every stage, but
the person/company processing the item claims tax refunds on its inputs.
Another poster put forward an excellent suggestion as to why we might have
this process, namely the government makes sure taxes are collected...

The bit about crosssing borders was to explain the international situation
within the EU. Technically the end buyer can have a refund when leaving a
country, but this is heavily restricted within the EU. The compensation is,
as I said, our ability to 'import' practically unlimited amounts of tax-paid
goods for personal use.

FROM DAS: Tell me about it! I bought a small cassette player about a year
ago on Times Square for about 29 bucks. I discovered I could have had it
for less from a 'more legit' shop nearby... OK, the 'loss' is minor, but
the principal holds.

 

....principle....

DAS

 

I believe all states that have a sales tax (45 states) also have an equivalent
use tax for items purchased out of state and bought in state. States can't (per
US Constitution) tax imports (except for alcohol due to 21st amendment quirks)
from other states, so they tax the "use" of the item in an attempt to avoid
sales tax avoidance.

What can vary is the credit you get for paying sales tax in another
jurisdiction. In most areas use tax is only due if the item is bought into your
state less than 6 months after the item was originally purchased. Most states
will also give you use tax credit for sales tax you paid to another
jurisdiction.

Many states permit counties or municipalities to levy sales taxes in addition to
the state sales tax. For example, NC's state sales tax rate is 4.5%
(temporarily half a percentage point higher than normal through summer next
year). Many counties also have a sales tax in addition to the state's. NC's
sales tax is also a bummer b/c it taxes clothing.

You could also pay the state dept of revenue directly without waiting for the
income tax form. Many states are putting use tax on their tax form in an
attempt to boost collection and use penalties of perjury to enforce it because
you sign that form.

That's pretty unique to NC.

 

Replacing the current income tax code with a flat tax would be a better option.
The tax code gets even more ridiculously complex each year with no end in sight.

Still consumption taxes rather than income taxes do have certain advantages.

 

Generally residence is not relevant. However, the state doesn't charge sales
tax on items being exported out of state. Usually the only way to do this is to
have the item shipped by common carrier; you were lucky.

The US Supreme Court has ruled* that destination jurisdiction's sales tax only
needs to be collected by a retailer if they have a physical nexus in that
state. However the buyer would still be responsible for paying the equivalent
use tax to their state or other tax collector. Still many companies, such as
Dell Computer, are now collecting sales tax for all states. With so many tax
rates, local sales taxes, and an extremely wide variation on what is/isn't
taxable in each jurisdiction, this can be quite complicated. I have read that
there are 7,500 jurisdictions in USA that charge various percentages of a sale
at retail.

*See National Bellas Hess, Inc., 386 U.S. 753 (1967); Quill Corp v State of
North Dakota., 504 U.S. 298 (1992).

 

That's absolutely correct, especially the poor maintenance part. It is amazing
how much better roads can be in Vermont than Massachusetts, despite both have
cold climates. Pittsburgh did an amazing job at eliminating pot holes over the
year by maintaining their roads better and putting a large emphasis at
prevention through fixing cracks etc.

 

I don't know if he'll win but the Kerry's avoid paying taxes on much of their
millions $$$ of investment income through tax free securities etc.