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No, VAT is a tax paid by consumers.
by DanBC 7y ago
No, VAT is a tax paid by consumers.
- leetcrew 7y agoare you making a claim about tax incidence or who literally pays the tax?
- DanBC 7y agoI'm saying who literally pays the tax. A business buying from another business can reclaim the VAT. The end usually consumer cannot. VAT is a consumption tax.
- jacquesm 7y agoThe tax is levied on the businesses who collect it on behalf of the government, it is a direct function of the amount of the invoice. So if you charge your customer less for your goods or services the tax paid goes down. VAT is short for 'Value Added Tax', in other words that which a business produces. But if your business provides no value then magically you still have to charge VAT, so clearly there is a relationship with turnover. By your logic you could reason that eventually all tax is paid by consumers because they pay the companies for the products and that includes corporate income tax and so on but whenever sales tax is low you will find that companies are more than happy to absorb the surplus as profits. VAT is the closest governments get to taxing businesses directly on their revenue streams.
- DanBC 7y agoBusinesses collect it, but it's not levied on businesses. How do you explain the fact that businesses can reclaim VAT they've paid, but consumers can't? The only explanation is that VAT is a tax paid by consumers, not by businesses.
- jacquesm 7y agoBecause if they could not reclaim it you would get VAT on VAT on VAT for every step in the value chain. The idea is to only impose it on the last step when the total value is known.