Business review; Balance of payments deficits
From the national educational radio network here is a Business Review ASSOCIATE PROFESSOR ROSS Wilhelm of the University of Michigan Graduate School of Business Administration presents his views and comments of business and economic activity in recent years the United States has been experiencing chronic balance of payments deficit a balance of payments deficit arises when the nation spends more abroad for such things as imported goods or buying foreign securities such as stocks and bonds or taking trips abroad for overseas military expenditures than it receives from foreigners from the things that they buy from us such as our computers in agricultural products or when they invest in our stocks and bonds or when they spend and traveling in the United States. An important reason why we have been experiencing a balance of payments deficit is because of the things that we sell to the rest of the world are not as competitive in the world markets as they have been in the past. Our products and our securities are higher priced in relation to the prices of foreign made substitutes and they have been in the past. And part of the reason why our goods are overpriced is due to
the way our government imposes taxes on the products we make and upon our corporations. The goods we sell overseas are forced to bear as part of the their price the taxes imposed by our government. Well many foreign products which compete with our products as well as many of the products imported into our country do not bear as a part of their price the taxes imposed by foreign governments on the products that they manufacture and sell to the rest of the world. That means that foreign nations of employed to eliminate the burden of taxes on the goods they sell to other nations is through the imposition of what is called a value added tax system instead of manufacturers excise and sales taxes and profits taxes such as we have France and West Germany have already adopted the value added tax system and by 970 all of the European common market countries will be using this system. If we in the United States expect our products to be competitive with those produced by Europeans we must consider replacing our manufacturers excise taxes in much of the corporation
profits tax with something similar to a value added tax system. A value added tax system is a tax on the difference between what a company receives for the things it sells and what the company pays for the things it buys such as raw materials or other items which go into its inventory. In other words it's a tax on the total wages salaries profits interest and rent payments. Under the rules of the General Agreement on Tariffs and Trade which we have signed along with most of the other major nations of the world it's possible for the government to refund to any exporting companies. The amount of any value added taxes imposed on the export of goods both France and West Germany are regularly refunding such taxes to their exporters. And this gives their products a price advantage over our products in the world markets. In addition a nation using a value added tax system impose the amount of the value added tax for its nation and any goods imported. Thus when we attempt to sell our
American products in the European Common Market they often have to bear not only our taxes but also the value added tax imposed by the foreign country. If we were to adopt of adopt a value added tax system similar to that being used in the European Common Market such a system would yield a number of advantages over our present hodgepodge system of taxes imposed by our government. First at present because interest payments by companies can be deducted from their tax as well dividend payments are not the duckbill this encourages business firms in the United States to borrow money rather than to sell stock to acquire the capital it needs. Under a value added tax system both profits and interest would be taxable and thus this incentive to borrow would reduce be reduced. Secondly a value added tax system would encourage producers to eliminate waste since added costs would reduce profits and third a value added tax system of the European type increases the return on capital and would encourage firms to invest and modernize.
We in the United States should overhaul our antiquated tax system so that it does enable our firms to be competitive in the world markets. And so it does encourage the creation of more jobs in the modernization of our plants. That was Associate Professor Ross Wilhelm of the University of Michigan Graduate School of Business Administration. With his views and comments on business and economic activity Business Review is recorded by the University of Michigan Broadcasting Service. This is the national educational radio network.
- Business review
- Balance of payments deficits
- Producing Organization
- University of Michigan
- National Association of Educational Broadcasters
- Contributing Organization
- University of Maryland (College Park, Maryland)
- AAPB ID
- Episode Description
- In program number 396, Ross Wilhelm talks about the United States' problems with a balance of payments deficit.
- Series Description
- This series, hosted by Ross Wilhelm, focuses on current news stories that relate to business and economic activity.
- Broadcast Date
- Media type
Producing Organization: University of Michigan
Producing Organization: National Association of Educational Broadcasters
Speaker: Wilhelm, Ross, 1920-1983
- AAPB Contributor Holdings
University of Maryland
Identifier: 61-35c-396 (National Association of Educational Broadcasters)
Format: 1/4 inch audio tape
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- Chicago: “Business review; Balance of payments deficits,” 1969-01-23, University of Maryland, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC, accessed December 8, 2023, http://americanarchive.org/catalog/cpb-aacip-500-jm23gp0z.
- MLA: “Business review; Balance of payments deficits.” 1969-01-23. University of Maryland, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Web. December 8, 2023. <http://americanarchive.org/catalog/cpb-aacip-500-jm23gp0z>.
- APA: Business review; Balance of payments deficits. Boston, MA: University of Maryland, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Retrieved from http://americanarchive.org/catalog/cpb-aacip-500-jm23gp0z