Abstract
Support for enactment of a federal value-added tax (VAT) in the United States is attributable to a substantial degree to the belief that significant international trade benefits would arise from such a change in tax policy. The imposition of a VAT on imports and the rebate of a VAT on exports — the “border tax adjustments” — are widely perceived within the business community to be an effective means of making imports more expensive in the domestic markets and exports more attractive in foreign markets. This assumes that a VAT is substituted for existing domestic taxes which currently are not paid by foreign producers or consumers. The expected result is an increase in exports and a reduction in imports. Given persistent trade deficits in excess of $100 billion annually, the border tax adjustment features of a VAT are seen as at least a partial remedy for the problem.
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References
Dan Throop Smith and Bertrand Fox, An Analysis of Value Added Taxation in the Context of the Tax Restructuring Act of 1980 (Washington, D.C.: The Financial Executives Research Foundation, 1981), pp. 20, 21.
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This history comes from Jeffrey A. Frankel, “International Capital Rows and Domestic Economic Policies,” National Bureau of Economic Research Working Paper No 2210, April 1987
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Ibid.
This synopsis of exchange rate theory is based on William H. Branson, “The Dynamic Interaction of Exchange Rates and Trade Flows,” National Bureau of Economic Research Working Paper No. 1780, December 1985.
Frankel and Meese, p. 21. 14 Frankel, p. 11.
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Ibid, pp. 22,27.
Frankel and Meese, p. 30.
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Ibid, p. 12.
Frankel and Meese, p. 49.
Dornbusch and Frankel, p. 22.
Ibid.
Ibid., p. 24.
Ibid., p. 25.
Frankel and Meese, p. 24.
Ibid., p. 10.
Ibid., p. 11.
Ibid., p. 31.
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Frankel and Meese, p. 54.
Frankel, p. 2.
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Ibid., p. 65.
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© 1989 Kluwer Academic Publishers
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Raboy, D.G. (1989). International Implications of Value-Added Taxes. In: Weidenbaum, M.L., Raboy, D.G., Christian, E.S. (eds) The Value-Added Tax: Orthodoxy and New Thinking. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-2496-3_7
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DOI: https://doi.org/10.1007/978-94-009-2496-3_7
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