300 prices in Europe

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

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

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

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

...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.