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VAT is Value Added Tax. What is value-add? Selling something for more than it cost you to make it, "adding value" as measured by revenues minus costs. What ar
by fsckboy 2y ago
VAT is Value Added Tax.
What is value-add? Selling something for more than it cost you to make it, "adding value" as measured by revenues minus costs.
What are other words for that? profit, income
What are taxes on that? income taxes.
from the point of view of the govt, the VAT is just an ordinary income tax.
but instead of being paid by the businesses, it's paid by the consumers, discouraging them from buying high margin items, encouraging them to buy low margin items.
- rich_sasha 2y agoWhat is nice about VAT is that you can tax different goods differently. You can have low VAT on essentials, which everyone - poor or rich - needs, but have higher tax on luxury items. In that respect, it is similar to a progressive tax, except harder to avoid - even an ultra rich who has "no income" buys stuff. Except of course there are gaping loopholes, for example businesses are effectively exempt from VAT, also you can buy stuff abroad where VAT is lower.
- Ekaros 2y agoVAT is essentially flat-tax. Which like all consumption tax works against those that spend higher proportion of their income on buying things necessary for living...