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VAT is basically a revenue tax. For each iPhone sold in Finland the government gets ~20%. Plenty of countries have a similar system.

bald 6y ago
VAT is taxing the difference between the procurement price and the sales price (thus its name Value-Added Tax), not the revenue. E.g., if Apple Finland procures the phone from Apple Inter Co., two separate entities, for USD 499 and sells it for USD 500, the tax would be on the USD 1, i.e., 20 cents, since Apple Finland would get the VAT paid to Apple Inter Co offset by the Finnish tax authorities.
- joefourier 6y ago
  While true in a sense, that's not the best way of looking at it. VAT is charged on the sale price of every intermediary, however businesses can claim back VAT on their purchases. In your example, Apple Inter Co. would sell the iPhone to Apple Finland for $499 + $119.76 (VAT in Finland is 24%). Apple Finland would pay $618.76, claim back $119.76, and sell the phone for $500 + $120 to the consumer, charging the consumer $620 and giving $120 to the government. So yes, Apple Finland will have given effectively about 20 cents to the government, but the total $120 of VAT will still be paid and calculated on the end sale price, not the profit margin.
ksec 6y ago
Kind of agree in concept, although as the comment below it really is sales tax, not "revenue" tax. And in reality when I said something similar to those that support "revenue tax" ( Whatever that means ) their counter argument are: >Apple is not paying VAT, the consumer are paying for it. >VAT is VAT, it is different. Apple needs to paid revenue tax. If you think these are some random people comments, I have had a journalist at a reputable newspaper gave me roughly similar response as above....
- AnthonyMouse 6y ago
  > Apple is not paying VAT, the consumer are paying for it. This has nothing to do with what kind of tax it is. If the company lacks competition then the price they can charge is the total value of the product to the customer. In that case any kind of tax is going to get paid by the company, because the customer won't pay any more than they already do or it's not worth buying the product anymore. If the company is in a competitive market then they have thin margins and any tax is going to be paid by the customer because the company has no choice but to pass it on or go out of business. If the company has some competition but not very rigorous (i.e. like Apple) then some of the tax is paid by the company and some by the customer, but it still doesn't matter what kind of tax it is. > VAT is VAT, it is different. Apple needs to paid revenue tax. This is just inaccurate. VAT and "revenue tax" are effectively equivalent. They may differ in some implementation details but not in anything fundamental.
  - quelltext 6y ago
    > VAT and "revenue tax" are effectively equivalent. I mean VAT is a type of revenue tax, sure. However it is rather uniform and generally it's rate is not affected, e.g. by the total revenue of a business, the type of business, and other such qualities. It's very easy to just shift the burden to the customer, not only due to the above but also because there's general understanding in the population (which visibly see the government set that tax uniformly on all their receipts). But there's typically also additional taxation on corporate income. Isn't that essentially the "revenue tax" people meant?
    - AnthonyMouse 6y ago
      > However it is rather uniform and generally it's rate is not affected, e.g. by the total revenue of a business, the type of business, and other such qualities. Neither are most corporate income taxes. Otherwise the company would use many small corporations instead of one larger one (which they already do to varying extents for other reasons) and avoid the higher rates. And, of course, the type of business can easily be taken into account with VAT if you like that sort of thing. > It's very easy to just shift the burden to the customer It's not any easier or harder than anything other way. Again, if they had thin margins, they have no choice but to raise prices or go out of business, so they raise prices and the customer pays. If they have higher margins they may (or may not) eat some of the tax because the reduction in demand from raising prices might cost them more than paying the tax would. That's the primary consideration in practice, not what you call the tax or whether the customer sees it on their bill. In some cases the customer may end up paying more than the amount of the tax because the business has to pass on the tax, which reduces demand, which lowers the sales volume they have to amortized fixed costs over, which requires them to raise prices even more. Though whether the customer sees it on their bill certainly affects the politics of it, because then they notice that they could be the one paying it, even though that was true either way. > But there's typically also additional taxation on corporate income. Isn't that essentially the "revenue tax" people meant? It is, the problem with "income" is that it doesn't have a jurisdiction. If you make sales, the customers are somewhere. If you hire employees, the employees are somewhere. If you own property, the property is somewhere. If you make "profit" it's just numbers in a bank's computer, which can be anywhere, so it goes wherever the taxes are lowest without regard to where anything tangible is. So if you don't want that to happen you have to tax the thing that actually happens in your jurisdiction, and we're back to VAT or payroll tax or whatever.

bald 6y ago

VAT is taxing the difference between the procurement price and the sales price (thus its name Value-Added Tax), not the revenue. E.g., if Apple Finland procures the phone from Apple Inter Co., two separate entities, for USD 499 and sells it for USD 500, the tax would be on the USD 1, i.e., 20 cents, since Apple Finland would get the VAT paid to Apple Inter Co offset by the Finnish tax authorities.

joefourier 6y ago
While true in a sense, that's not the best way of looking at it. VAT is charged on the sale price of every intermediary, however businesses can claim back VAT on their purchases. In your example, Apple Inter Co. would sell the iPhone to Apple Finland for $499 + $119.76 (VAT in Finland is 24%). Apple Finland would pay $618.76, claim back $119.76, and sell the phone for $500 + $120 to the consumer, charging the consumer $620 and giving $120 to the government. So yes, Apple Finland will have given effectively about 20 cents to the government, but the total $120 of VAT will still be paid and calculated on the end sale price, not the profit margin.

ksec 6y ago

Kind of agree in concept, although as the comment below it really is sales tax, not "revenue" tax. And in reality when I said something similar to those that support "revenue tax" ( Whatever that means ) their counter argument are: >Apple is not paying VAT, the consumer are paying for it. >VAT is VAT, it is different. Apple needs to paid revenue tax. If you think these are some random people comments, I have had a journalist at a reputable newspaper gave me roughly similar response as above....

AnthonyMouse 6y ago
> Apple is not paying VAT, the consumer are paying for it. This has nothing to do with what kind of tax it is. If the company lacks competition then the price they can charge is the total value of the product to the customer. In that case any kind of tax is going to get paid by the company, because the customer won't pay any more than they already do or it's not worth buying the product anymore. If the company is in a competitive market then they have thin margins and any tax is going to be paid by the customer because the company has no choice but to pass it on or go out of business. If the company has some competition but not very rigorous (i.e. like Apple) then some of the tax is paid by the company and some by the customer, but it still doesn't matter what kind of tax it is. > VAT is VAT, it is different. Apple needs to paid revenue tax. This is just inaccurate. VAT and "revenue tax" are effectively equivalent. They may differ in some implementation details but not in anything fundamental.
- quelltext 6y ago
  > VAT and "revenue tax" are effectively equivalent. I mean VAT is a type of revenue tax, sure. However it is rather uniform and generally it's rate is not affected, e.g. by the total revenue of a business, the type of business, and other such qualities. It's very easy to just shift the burden to the customer, not only due to the above but also because there's general understanding in the population (which visibly see the government set that tax uniformly on all their receipts). But there's typically also additional taxation on corporate income. Isn't that essentially the "revenue tax" people meant?
  - AnthonyMouse 6y ago
    > However it is rather uniform and generally it's rate is not affected, e.g. by the total revenue of a business, the type of business, and other such qualities. Neither are most corporate income taxes. Otherwise the company would use many small corporations instead of one larger one (which they already do to varying extents for other reasons) and avoid the higher rates. And, of course, the type of business can easily be taken into account with VAT if you like that sort of thing. > It's very easy to just shift the burden to the customer It's not any easier or harder than anything other way. Again, if they had thin margins, they have no choice but to raise prices or go out of business, so they raise prices and the customer pays. If they have higher margins they may (or may not) eat some of the tax because the reduction in demand from raising prices might cost them more than paying the tax would. That's the primary consideration in practice, not what you call the tax or whether the customer sees it on their bill. In some cases the customer may end up paying more than the amount of the tax because the business has to pass on the tax, which reduces demand, which lowers the sales volume they have to amortized fixed costs over, which requires them to raise prices even more. Though whether the customer sees it on their bill certainly affects the politics of it, because then they notice that they could be the one paying it, even though that was true either way. > But there's typically also additional taxation on corporate income. Isn't that essentially the "revenue tax" people meant? It is, the problem with "income" is that it doesn't have a jurisdiction. If you make sales, the customers are somewhere. If you hire employees, the employees are somewhere. If you own property, the property is somewhere. If you make "profit" it's just numbers in a bank's computer, which can be anywhere, so it goes wherever the taxes are lowest without regard to where anything tangible is. So if you don't want that to happen you have to tax the thing that actually happens in your jurisdiction, and we're back to VAT or payroll tax or whatever.