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Trade criticism

Under a sales tax system, only businesses selling to the end-user are required to collect tax and bear the accounting cost of collecting the tax. Under VAT, manufacturers and wholesale companies also incur accounting expenses to handle the additional paperwork required for collecting VAT, increasing overhead costs and prices.

The American Manufacturing Trade Action Coalition in the United States consider VAT charges on US products and rebates for products from other countries to be an unfair trade practice. AMTAC claims that so-called "border tax disadvantage" is the greatest contributing factor to the US current account deficit, and estimated this disadvantage to US producers and service providers to be $518 billion in 2008 alone. US politicians such as congressman Bill Pascrell, advocate either changing WTO rules relating to VAT or rebating VAT charged on US exporters. A business tax rebate for exports was proposed in the 2016 GOP tax reform policy paper. The assertion that this "border adjustment" would be compatible with the rules of the WTO is controversial; it was alleged that the proposed tax would favour domestically produced goods as they would be taxed less than imports, to a degree varying across sectors. For example, the wage component of the cost of domestically produced goods would not be taxed.

A 2021 study reported that value-added taxes were unlikely to distort trade flows.