Value Added Tax; (i.e. VAT sales tax method)

[I'm Supposn]

The advantages of VAT

I agree that their are a lot of positive things about some type of tax on trade. But I really dont think that a VAT tax is the answer - just way too unnessasarally complicated and it may have a tendancy to become more of a tax on business than on consumption. You did a great job of pointing out some of the positive things about a VAT - but please explain why you think that a VAT is superior to a simple sales tax.

ImageP, I know that I wrote a response to this message, but I can't find the post.

Commercial enterprises receive 100% refunds of their VAT payments, there no advantage for business to business transactions to be conducted “under the table”. There are significantly less opportunities for tax evasion within any Vat system. For both the government and the taxpayers there are no appreciable differences of administration expenses between VAT or any other sales tax method that I’m aware of.

The accounting for determining net income of enterprises or entrepreneurs is difficult and comparatively expensive. There’s an entire underground of people working “off the books”. There are innumerable opportunities for individual and corporate income tax evasion.

Buyers are now unaware of what portion of their purchase prices represent any taxes that were levied within prior links of the transaction chains. Excluding sales taxes, they are not even aware of FICA taxes, corporate income taxes or any other taxes that may be imbedded within their immediate purchase transaction.

There’s absolutely no VAT concealed between any links of VAT transaction chains. Within every purchase, buyers, (some of which are voters), are made aware of each penny of VAT they contribute to government’s revenue.

Nation’s normally waive taxes upon their exports but we can’t waive taxes that are concealed and thus unknown. (For a superior trade policy, refer to www.USA-Trade-Deficit.Blogspot.Com )

Respectfully, Supposn

 

[I'm Supposn]

VAT Tax of 5% per production level

So the farmer grows $1,000 worth of cotton and sells it to the mill that makes thread for $1,000 + $50 (VAT) so the total price is $1,050
The thread mill then turns that cotton into $2,100 worth of thread which they invoice for $2,100 + $105 (VAT) so the total price is $2,205
The shirt making company turns that $2,205 worth of thread into 1000 shirts valued at $4,410 + $220.50 (VAT) so the total price is $4,630.50
The shirt retailer then retails those 1000 shirts for $9,621 + $463.05 (VAT) so the consumer pays a grand total of $10,084.05 for shirts ($10.08 per shirt)
The Government would have collected a total of $463.05 -$220.50 -$105 - $50 = $84.55 in taxes.

ImageP, both your understanding of Vat and your arithmetic is faulty. Respectfully, Supposn


VAT Tax @ 5% rate

So the farmer grows $1,000 worth of cotton and sells it to the mill that makes thread for $1,000 + $50 (VAT) so the total price is $1,050
The farmer deducts the VAT what he’s paid and sends the government the difference. You haven’t mentioned all of the expenses the farmer to other enterprises in order to grow that $1,000 worth of cotton. For the sake of simplicity, let us assume that the farmer has no business expanses other than his own payroll.
The farmer would then as you wrote, send the government $50.

The thread mill then turns that cotton into $2,100 worth of thread which they invoice for $2,100 + $105 (VAT) so the total price is $2,205.
The thread mill passes on to the government 105 – 50 = $55.

The shirt making company turns that $2,205 worth of thread into 1000 shirts valued at $4,410 + $220.50 (VAT) so the total price is $4,630.50
The shirt maker passes on to the government 220.50 – 105 = $115.50

The shirt retailer then retails those 1000 shirts for $9,621 + $481.05 (VAT) so the consumers pay a grand total of $10,102.05 .
The shirt retailer passes on to the government 4,81.05 – 220.50 = $260.55 .

The Government would have collected a total of 260.55 + $115.50 + $55 + $50 = $481.05 of VAT revenue.

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At 5% simple sales tax, the same chain of sale transactions would provide the government with 481.05 + 220.50 + $105 + $50 = $856.55 of revenue.

 

[I'm Supposn]

ImageP, Phattonez Ockham and all others,
. the 232 word firs message of this discussion thread was wordy; but to provide a reasonable description of VAT and its major advantages, is 232 words too wordy? I of course didn’t think so.

I was satisfied with the paragraph,
. “The total explicitly itemized sales tax paid by any purchaser within any individual link of the chain of sales transactions is always the government’s entire tax revenues thus far paid within that chain. This remains true from the first to the last transaction link of the chain“.
. I continue to believe that’s explicit.

I speculate if the descriptions of VAT were so misunderstood; to what extent are the messages criticizing VAT really valid?

Respectfully, Supposn

 

[jking948]

ImageP, Phattonez Ockham and all others,
. the 232 word firs message of this discussion thread was wordy; but to provide a reasonable description of VAT and its major advantages, is 232 words too wordy? I of course didn’t think so.

I was satisfied with the paragraph,
. “The total explicitly itemized sales tax paid by any purchaser within any individual link of the chain of sales transactions is always the government’s entire tax revenues thus far paid within that chain. This remains true from the first to the last transaction link of the chain“.
. I continue to believe that’s explicit.

I speculate if the descriptions of VAT were so misunderstood; to what extent are the messages criticizing VAT really valid?

Respectfully, Supposn

I think when people here VAT they don't think about the whole proposal but rather just the additional tax based on how much is spent. That is why I posted the article from the Atlantic because I felt it did a great job of explaining the VAT. I feel like some in here who disagree with the VAT understand it very well but some don't as well.

 

[I'm Supposn]

WashUNut, I don’t believe it is politically or economically feasible to replace all Income taxes with a consumption tax, (e.g. the “fair tax) but to the greatest extent politically and financially feasible I advocate such a shift of revenue sources. I particularly advocate the VAT method of sales taxation.

Unlike other taxes upon enterprises or transactions, no VAT is passed on from prior links of transaction chains in any concealed manner. The itemized Vat of a sales transaction is the entire government revenue up to that link within the chain.

No one knows how much FICA, income taxes, sales taxes or other types of taxes are concealed within almost everything they purchase. Taxpayers are made aware of every penny they pay within every transaction

Respectfully, Supposn