“Because the United States is the only industrial country that does not have a VAT, other countries “game” global tax treaties by employing their VAT to subsidize their exports into the United States, simultaneously (and purposely) pricing U.S. imports out of the other countries’ markets. They rebate VAT taxes on exports and impose an equivalent tax on all imports from the United States.
A VAT is a very simple consumption tax system. It greatly encourages savings by not taxing money saved or the interest generated. At each stage in the production and sale of a good or service, the business pays a tax on the value it adds, no more.
In practice, firms in most countries either pay the tax instantly or accrue the amounts owed and pay the government monthly or quarterly. The system is simple, perfect for modern computerized accounting, and allows taxpayers to know their tax liability and the government to better anticipate revenues. Cheating is difficult with a VAT, easily spotted, and thus limited. Best of all, taxpayers have no compliance burdens. None. There are no IRS penalties. The VAT is paid automatically when someone buys something. Business does the paperwork. There is no April 15 tax day.
Today, the federal tax on business is set at a 35 percent rate, the highest of any other nation. If a five percent VAT were created and the U.S. corporate business tax totally eliminated, the U.S. would get the same amount of revenues.