4 ms·

How is VAT regressive or hidden? For a start, I'd say that just about every EU citizen is aware of it. Plus, prices in shops have to show VAT-inclusive prices t

How is VAT regressive or hidden? For a start, I'd say that just about every EU citizen is aware of it. Plus, prices in shops have to show VAT-inclusive prices to end customers, unlike some states in the USA where sales taxes can get magically added on to the final bill. Secondly, it's not regressive because the more goods and services you buy, the more you get taxed. If I buy a luxury yacht, I'll end up paying more VAT than someone buying a toy boat. Same tax rate despite the increased bill. Now, rich individuals may well try out all kinds of tax avoidance schemes but that's not a problem specific to VAT...

djrogers 12y ago
I'd argue that showing pre-tax prices and charging tax at checkout makes the tax burden much more obvious to most consumers. Showing only the post-tax price on the tag hides the proportions of the tax vs item cost.
- mbesto 12y ago
  At the end of the year why does it matter what my VAT burden is anyway? As long as I have enough cash in the bank to pay for the things I need, and my bank account isn't negative at the end of the year, then I'm fine right? What behaviors are you trying to support?
- reitanqild 12y ago
  Obviously. It also means you can't just sum together the prices of the stuff to get the total. It annoys me seriously every time.
- mastef 12y ago
  I was super-annoyed when first time in USA to find out I had to pay more at the cashier. Also it makes products seem cheaper than they really are - it's a cop-out to display pre-tax prices if you're billing more at the counter. Are people shopping with a calculator?
toyg 12y ago
> For a start, I'd say that just about every EU citizen is aware of it. They know it exists, they don't know how it works or why (unless they run a business). > Plus, prices in shops have to show VAT-inclusive prices to end customers ... which is exactly what I mean by "hiding it". You'll hardly ever see "€ 4.00 + € 1.00 vat" when going through shelves; you'll always see "€ 5.00". You have no idea how that price is calculated, what is tax and what is not, until after you've paid -- and even then you'll see an aggregated total, so if your basket included stuff that was taxed in different ways, you'll likely never know. Which nobody cares about, because we don't know how VAT works, for us it's just a random pricing element like the cost of materials. Except it's not: when it's said and done, it's a tax on fixed-income employees who can't justify a VAT return. The american approach to sales tax, which seems complicated and "magic" at first, is actually much more transparent. > Secondly, it's not regressive because the more goods and services you buy, the more you get taxed. Nope. It's regressive because it's flat rate. A millionaire buying a dishwasher will pay the same amount of tax as a regular joe buying the same dishwasher, in practice penalising the poorest of the two. That's the definition of regressive taxation. The theoretical notion that this is evened out by millionaires buying dozens of dishwashers versus joe's single one, is just that: theoretical. In practice, it does not happen: consumption levels are basically the same across most of the population. > If I buy a luxury yacht, I'll end up paying more VAT than someone buying a toy boat. If you buy a luxury yacht, it's likely not owned by you; it's owned by You™ Ltd, and filed as asset for this or that reason. You™ Ltd will diligently file its VAT forms, of course, and in the end it will get that VAT money back. Of course there are rules and enforcement etc etc, but in practice that's how it works for everything but the most outrageous items. > rich individuals may well try out all kinds of tax avoidance schemes but that's not a problem specific to VAT No, but VAT makes it trivial to game the system in practice, which is why businesses are fine with it. Note how there are constant attempts at abolishing "pesky" laws like inheritance tax or stamp duty, which touch very few individuals but are hard to game; whereas VAT involves everything and everyone but it's just accepted as part and parcel of doing business, because in the end it's paid only by fixed-income n00b employees who can't justify a VAT return.
- joosters 12y ago
  They know it exists, they don't know how it works or why (unless they run a business). What? It's just a percentage. You don't need to be a business to understand that. ...which is exactly what I mean by "hiding it". [...] That's not hiding it. Companies can (broadly speaking) also show ex-VAT prices, should they choose, they are just obliged to show the inc-VAT ones more prominently. People care about the end cost, I'd guess if you polled people, they'd overwhelmingly choose the inc-VAT display over ex-VAT. Also, in the UK, your receipt will show the breakdown of tax and may also highlight tax-exempt items, so if you really care for the details, you can see them. The american approach to sales tax, which seems complicated and "magic" at first, is actually much more transparent. Again, I'd wager that the actual costs are the ones that consumers want to see, not the pre-tax prices. Do US customers really sum their trolley of goods in their heads and add on the exact tax % to know how much they are spending before they hit the tills? Which is more convenient? Nope. It's regressive because it's flat rate Um, I'd suggest that you look up the definition of a 'regressive tax', you appear confused. 'flat rate' or 'proportional tax' is _not_ regressive, again by the very definition! [yacht ownership discussion snipped] because in the end it's paid only by fixed-income n00b employees who can't justify a VAT return. VAT return? End customers have no VAT to claim back. They are people that pay it! Now if you are running a business, and so have business purchases, then obviously you need to be aware of tax regulations. If you are a 'n00b' employee then you pay it.

djrogers 12y ago

I'd argue that showing pre-tax prices and charging tax at checkout makes the tax burden much more obvious to most consumers. Showing only the post-tax price on the tag hides the proportions of the tax vs item cost.

mbesto 12y ago
At the end of the year why does it matter what my VAT burden is anyway? As long as I have enough cash in the bank to pay for the things I need, and my bank account isn't negative at the end of the year, then I'm fine right? What behaviors are you trying to support?
reitanqild 12y ago
Obviously. It also means you can't just sum together the prices of the stuff to get the total. It annoys me seriously every time.
mastef 12y ago
I was super-annoyed when first time in USA to find out I had to pay more at the cashier. Also it makes products seem cheaper than they really are - it's a cop-out to display pre-tax prices if you're billing more at the counter. Are people shopping with a calculator?

toyg 12y ago

> For a start, I'd say that just about every EU citizen is aware of it. They know it exists, they don't know how it works or why (unless they run a business). > Plus, prices in shops have to show VAT-inclusive prices to end customers ... which is exactly what I mean by "hiding it". You'll hardly ever see "€ 4.00 + € 1.00 vat" when going through shelves; you'll always see "€ 5.00". You have no idea how that price is calculated, what is tax and what is not, until after you've paid -- and even then you'll see an aggregated total, so if your basket included stuff that was taxed in different ways, you'll likely never know. Which nobody cares about, because we don't know how VAT works, for us it's just a random pricing element like the cost of materials. Except it's not: when it's said and done, it's a tax on fixed-income employees who can't justify a VAT return. The american approach to sales tax, which seems complicated and "magic" at first, is actually much more transparent. > Secondly, it's not regressive because the more goods and services you buy, the more you get taxed. Nope. It's regressive because it's flat rate. A millionaire buying a dishwasher will pay the same amount of tax as a regular joe buying the same dishwasher, in practice penalising the poorest of the two. That's the definition of regressive taxation. The theoretical notion that this is evened out by millionaires buying dozens of dishwashers versus joe's single one, is just that: theoretical. In practice, it does not happen: consumption levels are basically the same across most of the population. > If I buy a luxury yacht, I'll end up paying more VAT than someone buying a toy boat. If you buy a luxury yacht, it's likely not owned by you; it's owned by You™ Ltd, and filed as asset for this or that reason. You™ Ltd will diligently file its VAT forms, of course, and in the end it will get that VAT money back. Of course there are rules and enforcement etc etc, but in practice that's how it works for everything but the most outrageous items. > rich individuals may well try out all kinds of tax avoidance schemes but that's not a problem specific to VAT No, but VAT makes it trivial to game the system in practice, which is why businesses are fine with it. Note how there are constant attempts at abolishing "pesky" laws like inheritance tax or stamp duty, which touch very few individuals but are hard to game; whereas VAT involves everything and everyone but it's just accepted as part and parcel of doing business, because in the end it's paid only by fixed-income n00b employees who can't justify a VAT return.

joosters 12y ago
They know it exists, they don't know how it works or why (unless they run a business). What? It's just a percentage. You don't need to be a business to understand that. ...which is exactly what I mean by "hiding it". [...] That's not hiding it. Companies can (broadly speaking) also show ex-VAT prices, should they choose, they are just obliged to show the inc-VAT ones more prominently. People care about the end cost, I'd guess if you polled people, they'd overwhelmingly choose the inc-VAT display over ex-VAT. Also, in the UK, your receipt will show the breakdown of tax and may also highlight tax-exempt items, so if you really care for the details, you can see them. The american approach to sales tax, which seems complicated and "magic" at first, is actually much more transparent. Again, I'd wager that the actual costs are the ones that consumers want to see, not the pre-tax prices. Do US customers really sum their trolley of goods in their heads and add on the exact tax % to know how much they are spending before they hit the tills? Which is more convenient? Nope. It's regressive because it's flat rate Um, I'd suggest that you look up the definition of a 'regressive tax', you appear confused. 'flat rate' or 'proportional tax' is _not_ regressive, again by the very definition! [yacht ownership discussion snipped] because in the end it's paid only by fixed-income n00b employees who can't justify a VAT return. VAT return? End customers have no VAT to claim back. They are people that pay it! Now if you are running a business, and so have business purchases, then obviously you need to be aware of tax regulations. If you are a 'n00b' employee then you pay it.