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Value added tax???

Discussion in 'Politics, Elections & Legislation' started by MTA Tom, Apr 8, 2010.

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  1. MTA Tom

    MTA Tom Active Member

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    The truly exciting part of a VAT system is that it provides endless scope for bureaucrats and their tinkering.

    In the UK, for example, a size 34B bra is VAT exempt; a size 34C bra is subject to the VAT.
     
  2. Ted K.

    Ted K. Member

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    No, a 20% value added tax doesn't work by taxing each step of production at an additional 20%. Instead, it taxes the "value added" at each stage of production. The value added is calculated by deducting the cost to the manufacturer of his raw materials from the proceeds from the sale of his goods.

    So a mining company will incur a VAT of 20% of the proceeds from the sale of its ore. The mining company will add this tax to the price of its ore. The smelter of this ore will incur a VAT of 20% of the difference between the proceeds from the sale of his iron bars and his cost of ore. The smelter will add this tax to the price of his iron bars. The steel mill will incur a VAT equal to 20% of the difference between the cost of the iron bars and the proceeds from the sale of the sheet steel. The steel mill will add this tax to the price of its sheet steel. The manufacturer of car wheels will incur a VAT equal to 20% of the difference between the cost of the sheet steel and the proceeds from the sale of his wheels. He will add this tax to the price of his wheels.

    The net effect of all this is that the total VAT collected by the government (and paid by the consumer) will equal 20% of the total cost to manufacture the car wheel. The only difference between a VAT and a sales tax is that the VAT is collected at each stage of production, not added at the consumer cash register. Because a VAT is not itemized or collected in a way that attracts attention, people don't object to a VAT the way they object to a sales tax. So VAT is almost always much, much higher than a sales tax. In Europe the VAT is around 15%.

    THE NET EFFECT OF A VAT AND A SALES TAX IS EXACTLY THE SAME - THE CONSUMER BEARS THE BURDEN OF A TAX WHICH IS EQUAL TO THE TAX PERCENTAGE MULTIPLIED BY THE AMOUNT OF THE SALE. You might view it as the same as the difference between embezzlement and theft - one takes a little longer to recognize than the other, but the result is the same.

    Oh yes, one other thing. Current sales taxes. Many run at or near 10%. Do we add the VAT to that? If so, we have the equivalent of 30% sales taxes - enough to throttle any economy, no matter how strong. If there is a credit for sales tax paid, how is that allocated back down the production chain? And what does that credit do to the incentive for states to raise their sales taxes? After all, an increase in sales tax wouldn't raise the price paid by the consumer if it's credited against the VAT.

    This VAT thing has a lot of moving parts. I don't think it will be adopted any time soon.

    Ted K.
     
  3. unplugged

    unplugged Active Member

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    The VAT tax is an excellant way to raise money.
    Adding 20% to the price of goods now sold is a great idea!
    Our economy is flowdering and people are not buying as many goods as they used to buy, so making more money ( for the governement) from the fewer goods being sold is a great idea!

    All those that understand "this wisdom" need to apply for the HOPE and CHANGE
    jobs that will be created by charging everyone even MORE for what we buy!!

    Why is it that only those that have never worked in the private sector are the ones that can see the wisdom of this TAX!!

    In the immortal words of Joe Biden "This is a really big F#$$%ing DEAL".
     
  4. bigdogtx

    bigdogtx Well-Known Member

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    Yes, but groceries and some other things that can be negotiated are not taxed under the VAT,,,,looks like more work for the special interest lobbyists,,,,wanna bet whether pelosi's husband will be exempt???? Don't you feel better about our gov't????
     
  5. Joe Potosky

    Joe Potosky Well-Known Member

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    Run up the dept and then figure out how to pay for it. Makes you think it was part of the plan.

    We are so screwed...
     
  6. 221

    221 Banned User Banned TS Supporters

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    I read today where 47% of Americans will pay no income taxes for 2009. Maybe they will give the other 52% an exemption......sorta like farmers get.....oh..that's right....they are called subsidies. Never mind.

    %~)
     
  7. crusha

    crusha TS Member

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    Second stupidest idea I ever heard.
     
  8. birdogs

    birdogs TS Member

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    The VAT is part of the radical agenda to reduice the US to the level of a Social Democtracy ala, France, or even Greece.

    I know I sound like a conspiracy nut BUT the VAT accomplishes what no other single act of government could. It makes the federal tax rate over 50% (perhaps over 60% in a short while) while making the people think that they are doing this to reduce the dficit and save the country.

    If enacted, the permanent unemployment rate in the US will be OVER 10%.
     
  9. stokinpls

    stokinpls Well-Known Member

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    "If enacted, the permanent unemployment rate in the US will be OVER 10%."

    Isn't that what Lord Soetoro's bunch has been saying? That we "should expect the 10% unemployment rate to become the norm.".
     
  10. Big Az Al

    Big Az Al Well-Known Member

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    so to do the math.

    the Copper mine takes ore that is essentially worthless, spends say $1.25 dollars per pound of concentrate do produce, and then has a value of say $4.00 a pound. So V A T 'd it is now $4.80 a pound

    Then the concntrate goes to a smelter, the value after that step is still only $4.00 or the V A T 'd amount of 4.80

    Then the smelted copper goes to a final refining process, at the end of that process it still a 4.00/4.80 dollar a pound product.

    After that it goes on to be made into wires and pipes, alloyed into brass to make valves and fittings.

    A part of the copper produced in our country is also exported.

    So where in the V A T mark up to you see that copper made out side of our country will still be selling

    FOR $4.00 A pound.

    for some reason, I think that the copper miners in our country are going to get......................................




    Screwed!

    AL Lingham
     
  11. Ted K.

    Ted K. Member

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    No Al, you got it wrong. The miner does not pay the whole VAT.

    The VAT is not assessed on the value (whatever that is), it's assessed on the difference between the sales price charged by the seller and his cost of raw materials. So if the miner sells his ore for $1.25 per pound, he pays a VAT equal to $.25 per pound. If the smelter sells his product for $2.00 per pound, he pays a VAT equal to 20% of the difference between $1.25 and $2.00, which amounts to $.15 per pound. If the steel mill sells his product for $3.00 per pound, it pays a VAT equal to 20% of the difference between $2.00 and $3.00, or $.20 per pound. If the wheel manufacturer sells his wheels for $4.00 per pound, he pays a VAT equal to $.20 per pound.

    So the total VAT paid by all the producers is $.80 per pound, which (surprise!) equals 20% of the $4.00 per pound selling price for the wheel sold to the consumer.

    An interesting aspect of most VATs is that they are refunded if the goods are sold outside the country of manufacture (i.e., exported). You see that happen when you leave Europe with some clothing you bought there - you present a form to EU customs, show them that you are taking the goods with you when you leave the country, and eventually they mail you a refund of the VAT you paid on them.

    The other side of that coin is that when you bring goods into a country with a VAT, you must pay the VAT on the purchase price of the goods. This is not the same as customs duties, which may be charged separately.

    Ted K.
     
  12. Sky Buster

    Sky Buster Sky Buster TS Supporters

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    Obama ran for President on the promise that he would not tax
    the middle class. Now comes V.A.T. He is a lieing sack of ----!
    In Canada, the VAT applies to almost everthing. Motel rooms,
    car rental, Harley parts, clothes. If we don't get the Bastards
    out, this country is doomed.
     
  13. ou.3200

    ou.3200 Well-Known Member

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    The Fair Tax is a better idea. Take a look at this!

    http://www.fairtaxplan.org/
     
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