3 ms·

Another mark for the VAT kills list

by pvaldes 4y ago

hef19898 4y ago
VAT as in Value Added Tax? How so?
- pvaldes 4y ago
  To start VAT reduces the margin of benefits of the maker and also damages the brand by requiring it to burn uncountable working hours to calculate taxes that could be used in a more productive way. This is bad, but their worse effect is to introduce friction in the trade, Introducing fear, angry, uncertainty and mistrust between buyer and seller. This has the effect of reducing the market. If people needs to pay more for a product the final effect is less items sold and people delaying their purchase. If people things that has been scammed with a product with a poor ratio cost/benefit will be reluctant to keep buying accessories or other products from the same brand. With VAT people needs to remind all of the time that the price for <stuff> that they asked for, could be with or without VAT, and that need to ask again to clear the issue and avoid surprises when paying. They will need also often to calculate the 21% more in your mind, before to decide to purchase or not, and this is a real pain in the ass. VAT changes the behavior of the clients to be more cautious and conservative when buying things. Buyers will keep buying the old stuff that they know well and ignore entirely the new products, or will delay their purchase until spend some time looking actively for cheaper replacements. This is specially bad for innovative companies, that need to recover as soon as possible the zillions invested for years into creating new products. They will success only if they can attract enough early adopters; and a market full of cautious buyers is not a good start.
  - hnbad 4y ago
    There are arguments against VAT but your argument is nonsensical. It sounds like you're thinking of how sales taxes work. The VAT rate varies throughout the EU so I'm not sure what you're basing the 21% on. In most of the EU that I'm aware of, VAT must be included in all listed consumer prices because that's what the consumer pays. VAT is only excluded by default in B2B prices so yes, sometimes as a business you have to double-check listed prices to see what you'll actually pay. It sounds like you're arguing for consistent price labelling regulations (aka consumer protection laws), not against VAT. VAT also doesn't really affect businesses. Businesses collect VAT from sales and pay it on purchases, then declare the difference to their tax agency and either pay any excess they collected or get refunded what they overpaid. It's literally a zero sum game and dealing with it in accounting is trivial on top of everything else you already have to keep track of. The problem with VAT is that for consumers it is an inflexible tax that acts regressively in practice: because it's a flat tax on all goods, customers with less money spend proportionally more of their income on VAT than customers with a lot of money. It also doesn't apply to business expenses (due to the aforementioned zero sum) and people earning higher incomes are more likely to have access to "job perks" that convert regular expenses to business expenses (e.g. business lunches, company vehicles, etc). If you wanted to reduce the burden on lower income households, you'd not just abolish the VAT but also abolish any other sales tax and instead raise income tax (especially the ceiling, which often lumps in millionaires and billionaires despite the 1000x difference in scale which often translates to an exponential difference in lifestyle) or (re)introduce a wealth tax (to discourage wealth hoarding and instead encourage reinvestment and commerce).
    - hnbad 4y ago
      To put it bluntly, a 20% VAT translates into an additional implicit 20% income tax for all income used to pay expenses. Assuming two people make €1k and €5k a month (after accounting for all other taxes) and both have fixed expenses of €1k, the former pays 20% taxes on their €1k and the other pays 20% taxes on their first €1k and gets to take the remaining €4k tax free to invest in retirement savings, repay loans or what have you. This translates into an effective 4% tax for the person making €5k compared to the 20% tax for the person barely making ends meet. This is why some people call it a regressive tax. You can literally take that €4k and put it all in a stable investment vehicle VAT-free. You only pay taxes on it if you spend it. The person making €1k a month will have the same 20% higher effective income tax but you will always pay a lower effective tax rate unless you also spend (i.e. purchase goods or services with) every single cent of your income. Cutting VAT would leave you both with more money but while nothing much would change for you it would increase the poorer person's effective disposable income by 25% (€800->€1000). Heck, even if income tax was raised by a flat 4% across the board, you'd be no worse off but their effective disposable income would increase by 20% (€800->€960).
bluepizza 4y ago
China also uses VAT..
mrbadger 4y ago
In fact, VAT is what facilitates the operation of the EU single market. Meanwhile, in the US: https://fsi.stanford.edu/events/why-europe%E2%80%99s-single-market-surpassed-america%E2%80%99s https://fsi.stanford.edu/events/why-europe%E2%80%99s-single-...
- nivenkos 4y ago
  The street-level sales tax in the US is a nightmare. But the EU's 25% VAT is absurdly high, 5% would be more reasonable.
  - lotsofpulp 4y ago
    State level percentage sales tax is simple enough, but the US has gone overboard with every jurisdiction implementing its own form of sales tax, and implemented using asinine calculations. Sometimes percentage, sometimes flat, sometimes combination, sometimes based on the volume, sometimes based on the mass of an ingredient, sometimes based on time of year, and on and on it goes. And it could be from federal, state, county, city, transit region, federal agency. I look at my mobile phone bill or hotel receipt and there are 4 to 10 (literally 10) itemized taxes, and I have no idea if I am being scammed or not. And the items applicable to sales tax and exempt from sales tax is constantly changing. And the entities exempt from sales tax and the documentation requirements, placed on merchants, is always changing. This is just the website for US federal diplomat sales tax exemption instructions. https://www.state.gov/sales-tax-exemption/ https://www.state.gov/sales-tax-exemption/ This type of complexity exists for federal employees, for 50 different state employees, and on more local levels. I can only assume there is massive amounts of under and overpaid sales tax, with all these avenues for corruption and mistakes. And how much of the country’s productivity is wasted on calculating and auditing all of this? Edit: this turned into a long rant, but just look at what a simple merchant is expected to know or implement in its systems to sell trivial consumables: > In addition to the specific text, each tax exemption card bears one of four animal symbols indicating the specific type of tax exemption of the cardholder: • Owl: mission tax exemption cards with unrestricted tax exemption. • Buffalo: mission tax exemption cards with some degree of restriction. • Eagle: personal tax exemption cards with unrestricted tax exemption. • Deer: personal tax exemption cards with some degree of restriction.
eecc 4y ago
or the sweet tax havens that make it easier for management to pull profits out of thin air?

Another mark for the VAT kills list

hef19898 4y ago

VAT as in Value Added Tax? How so?

pvaldes 4y ago
To start VAT reduces the margin of benefits of the maker and also damages the brand by requiring it to burn uncountable working hours to calculate taxes that could be used in a more productive way. This is bad, but their worse effect is to introduce friction in the trade, Introducing fear, angry, uncertainty and mistrust between buyer and seller. This has the effect of reducing the market. If people needs to pay more for a product the final effect is less items sold and people delaying their purchase. If people things that has been scammed with a product with a poor ratio cost/benefit will be reluctant to keep buying accessories or other products from the same brand. With VAT people needs to remind all of the time that the price for <stuff> that they asked for, could be with or without VAT, and that need to ask again to clear the issue and avoid surprises when paying. They will need also often to calculate the 21% more in your mind, before to decide to purchase or not, and this is a real pain in the ass. VAT changes the behavior of the clients to be more cautious and conservative when buying things. Buyers will keep buying the old stuff that they know well and ignore entirely the new products, or will delay their purchase until spend some time looking actively for cheaper replacements. This is specially bad for innovative companies, that need to recover as soon as possible the zillions invested for years into creating new products. They will success only if they can attract enough early adopters; and a market full of cautious buyers is not a good start.
- hnbad 4y ago
  There are arguments against VAT but your argument is nonsensical. It sounds like you're thinking of how sales taxes work. The VAT rate varies throughout the EU so I'm not sure what you're basing the 21% on. In most of the EU that I'm aware of, VAT must be included in all listed consumer prices because that's what the consumer pays. VAT is only excluded by default in B2B prices so yes, sometimes as a business you have to double-check listed prices to see what you'll actually pay. It sounds like you're arguing for consistent price labelling regulations (aka consumer protection laws), not against VAT. VAT also doesn't really affect businesses. Businesses collect VAT from sales and pay it on purchases, then declare the difference to their tax agency and either pay any excess they collected or get refunded what they overpaid. It's literally a zero sum game and dealing with it in accounting is trivial on top of everything else you already have to keep track of. The problem with VAT is that for consumers it is an inflexible tax that acts regressively in practice: because it's a flat tax on all goods, customers with less money spend proportionally more of their income on VAT than customers with a lot of money. It also doesn't apply to business expenses (due to the aforementioned zero sum) and people earning higher incomes are more likely to have access to "job perks" that convert regular expenses to business expenses (e.g. business lunches, company vehicles, etc). If you wanted to reduce the burden on lower income households, you'd not just abolish the VAT but also abolish any other sales tax and instead raise income tax (especially the ceiling, which often lumps in millionaires and billionaires despite the 1000x difference in scale which often translates to an exponential difference in lifestyle) or (re)introduce a wealth tax (to discourage wealth hoarding and instead encourage reinvestment and commerce).
  - hnbad 4y ago
    To put it bluntly, a 20% VAT translates into an additional implicit 20% income tax for all income used to pay expenses. Assuming two people make €1k and €5k a month (after accounting for all other taxes) and both have fixed expenses of €1k, the former pays 20% taxes on their €1k and the other pays 20% taxes on their first €1k and gets to take the remaining €4k tax free to invest in retirement savings, repay loans or what have you. This translates into an effective 4% tax for the person making €5k compared to the 20% tax for the person barely making ends meet. This is why some people call it a regressive tax. You can literally take that €4k and put it all in a stable investment vehicle VAT-free. You only pay taxes on it if you spend it. The person making €1k a month will have the same 20% higher effective income tax but you will always pay a lower effective tax rate unless you also spend (i.e. purchase goods or services with) every single cent of your income. Cutting VAT would leave you both with more money but while nothing much would change for you it would increase the poorer person's effective disposable income by 25% (€800->€1000). Heck, even if income tax was raised by a flat 4% across the board, you'd be no worse off but their effective disposable income would increase by 20% (€800->€960).

bluepizza 4y ago

China also uses VAT..

mrbadger 4y ago

In fact, VAT is what facilitates the operation of the EU single market. Meanwhile, in the US: https://fsi.stanford.edu/events/why-europe%E2%80%99s-single-market-surpassed-america%E2%80%99s https://fsi.stanford.edu/events/why-europe%E2%80%99s-single-...

nivenkos 4y ago
The street-level sales tax in the US is a nightmare. But the EU's 25% VAT is absurdly high, 5% would be more reasonable.
- lotsofpulp 4y ago
  State level percentage sales tax is simple enough, but the US has gone overboard with every jurisdiction implementing its own form of sales tax, and implemented using asinine calculations. Sometimes percentage, sometimes flat, sometimes combination, sometimes based on the volume, sometimes based on the mass of an ingredient, sometimes based on time of year, and on and on it goes. And it could be from federal, state, county, city, transit region, federal agency. I look at my mobile phone bill or hotel receipt and there are 4 to 10 (literally 10) itemized taxes, and I have no idea if I am being scammed or not. And the items applicable to sales tax and exempt from sales tax is constantly changing. And the entities exempt from sales tax and the documentation requirements, placed on merchants, is always changing. This is just the website for US federal diplomat sales tax exemption instructions. https://www.state.gov/sales-tax-exemption/ https://www.state.gov/sales-tax-exemption/ This type of complexity exists for federal employees, for 50 different state employees, and on more local levels. I can only assume there is massive amounts of under and overpaid sales tax, with all these avenues for corruption and mistakes. And how much of the country’s productivity is wasted on calculating and auditing all of this? Edit: this turned into a long rant, but just look at what a simple merchant is expected to know or implement in its systems to sell trivial consumables: > In addition to the specific text, each tax exemption card bears one of four animal symbols indicating the specific type of tax exemption of the cardholder: • Owl: mission tax exemption cards with unrestricted tax exemption. • Buffalo: mission tax exemption cards with some degree of restriction. • Eagle: personal tax exemption cards with unrestricted tax exemption. • Deer: personal tax exemption cards with some degree of restriction.

eecc 4y ago

or the sweet tax havens that make it easier for management to pull profits out of thin air?