VAT tax

Pinnacles of Stupidity
value-added tax

Junk Economics -- Spreading the Misery

by Hanno Beck

You and I see a lot of foolish statements from time to time, but once in a while a real zinger turns up.

Let's set the stage. The Industry Standard, in its June 12 issue, reports that "David Byrne, European Commissioner for Health and Consumer Protection, said EU exporters are at a disadvantage against their U.S. counterparts in the burgeoning online products market" due to the value-added tax (VAT) levied by EU member nations.

So far, so good. The VAT is a notoriously regressive tax that is also very expensive to collect and intrusive to audit. It makes sense to point to VAT as a major troublemaker that raises EU consumer prices and harms EU producers.

Now, what does a European Commissioner, who is probably a pretty smart guy, propose as a solution? Remember, he is in charge of consumer protection -- his job is to help citizens of EU nations obtain goods and services cheaply and fairly.

A normal person would figure this out in no more than five seconds -- cut the stupid VAT, releasing consumers from some of its iniquitous burdens, and at the same time improving the competitiveness of EU exporters.

But Commissioner Byrne is no normal person. His proposal is not to alleviate any burdens at all. Instead, he announced that he will "present proposals urging the U.S. to tax exports of online digital products"! A value-added tax in the U.S., said Byrne, would "ensure there's a level playing field."

When Commissioner Byrne was a five-year-old boy and got caught doing something wrong, he might have exclaimed "you should do it too, then we'll both be guilty" and we would have thought him silly and quite immature. But when a fully-grown adult in a leadership position can do no better, calling on other countries to use obsolete, destructive taxes because the EU already suffers from them, what can we think? Byrne is a badly confused man in an important position ... and our latest source of Junk Economics.

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