FOR IMMEDIATE RELEASE
Contact:
Karl Spilhaus
(617) 542-8220
kspilhaus@nationaltextile.org
NTA Calls on U.S. Trade Representative to Seek End of $300 Billion Annual Trade Tax Disadvantage Imposed on U.S. Industries
BOSTON, April 6, 2006 -- The National Textile Association (NTA), at a March 8, 2007, Board meeting in New York City endorsed the Border Tax Equity Act written by Representative Bill Pascrell from New Jersey (member of the Ways and Means Committee and Representative Mike Michaud from Maine. "This bill is aimed at eliminating a $201 billion subsidy for foreign manufacturers who export to the U.S. and a $93 billion penalty tax on companies that export U.S. products abroad', said NTA president, Karl Spilhaus.
The
inequity results from the international trade rules put in place by the World
Trade Organization (WTO). The WTO rules permit the 137 nations that employ an
indirect tax, such as the VAT, to rebate those taxes on exports, while also
levying them on imports. The U.S. uses a direct tax system --taxes on income or
on owning property. Under the WTO rules, no portion of these taxes may be
rebated. And the U.S. does not impose on imports a fee equivalent to these
direct taxes.
The
result: a U.S. company pays corporate income tax and property tax in the U.S.
If it exports its product to, say France, they will pay a 19.6% French VAT in
addition to any import duties. In other words, the U.S. company will pay the
full amount of both the U.S. and the French taxes. On the other hand, when a
company in France sends its products to the U.S., they are not subject to any
U.S. taxes in addition to our relatively low (typically not above 10%) import
duties. Additionally, the government of France will rebate to the exporter the
French VAT. Net result, the French company pays neither U.S. nor French tax.
Every
country the U.S. does significant trading with has the VAT. The amount of VAT
refund --government subsidization of exports-- is $201 billion a year. The VAT
imposed on U.S. exports to those countries is $93 billion a year.
Due to the VAT disadvantage, American companies have realized little benefit from foreign market openings promised in the many rounds of trade talks. Take, for example, Europe (the EU 25). IN 1968 the average tariff rate for U.S. products exported to Europe was 10.4%; in 2006 the average rate was 4.4% --on the face a significant reduction which should have made it easier to export to Europe. But when we add the VAT to get the true total tax burden on imports, the picture looks quite different. In 1968 the total of duty plus VAT on U.S. exports to Europe was 23.84% (10.4% duty plus 13.44% VAT); in 2006 the total was 23.76%. In other words, the reduction in tariff was matched with an equal and offsetting rise in the VAT (to 19.36%). Over the same period U.S. tariffs on goods from Europe were slashed by at least a third.
Border Tax Equity Act requires that upon completion of WTO negotiations by a set date, the U.S. Trade Representative must certify to Congress that the goals of equitable border tax treatment for goods and services have been met. If these efforts fail, the bill 1) directs the United States to begin charging a fee on imports from VAT countries equal to the VAT rebate each product receives and 2) mandates that US exporters receive a tax rebate equal to the amount of VAT imposed on importation into a foreign market.
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