Value Added Taxes Essay

1063 words - 5 pages

Value Added Taxes
A value-added tax (VAT) is a fee that is assessed against businesses by a government at various points in the production of goods or services, usually any time a product is resold or value is added to it. For tax purposes, value is added whenever the value of a product increases as a result of the application of a company's factors of production, such as labor and equipment. With VAT, the taxable amount is based on the value added at each stage of the process of producing goods and bringing them to market. By imposing a tax on receipts but then allowing a credit for VAT taxes collected at earlier stages of production, the credit-invoice VAT taxes the “value added” by each ...view middle of the document...

On the other hand, opponents argue that VAT would be more complicated to implement than other tax-reform options, such as a national sales tax. They also worry that it would increase the cost of food, medicine, and other necessities, which would hurt the poor. A value-added tax has a flat tax rate rather a progressive one. In general terms, a VAT on all consumption expenditures, with a single rate that is constant over time, would be relatively neutral compared to other major revenue sources (Mitchell).
As mentioned above, America is one of the few nations without a value-added tax (VAT), but there is growing pressure to impose the levy. Some like the VAT because it offers a new way to finance bigger government. Others like the VAT because compared to the income tax; it does not impose as much damage on the economy. Some want to use the revenues from a VAT to facilitate tax reform and Social Security reform. There are even some people who believe that a VAT will somehow reduce the trade deficit. However, many people dislike the VAT, often for some of the reasons listed above. Supporters of limited government oppose the tax because it makes it easier for politicians to expand the size of government. By contrast, some on the left oppose the VAT because of its one redeeming feature, it is a consumption-based levy and therefore not as easy to use for economically destructive income redistribution. Although it is a relatively non-destructive way to collect revenue, a VAT would be a serious mistake for the United States. The only condition that would make a VAT acceptable is complete repeal of all income taxes and a constitutional amendment that prohibits Congress from re-imposing taxes on any type of income. But this is not a realistic option, which is why the VAT should be stopped (Michell).

Many experts believe that some of the negative effects of VAT would be:

Expanding the cost of government. Countries with VATs have a much heavier total tax burden than those without VATs. Before the creation of VATs, the burden...

Other Papers Like Value Added Taxes

Philippines' Aquino Essay

763 words - 4 pages tariff on petroleum products is 3 percent, and is subject to a 12 percent value-added tax. Gasoline has an effective tax rate of about 25 percent of the retail price. The World Bank said petroleum products in the Philippines are "lightly taxed" as compared to other oil importing country. Raising gasoline excise taxes will also ensure that the Philippine tax system is progressive as "petroleum products are disproportionately consumed by the richer

Indirect Taxation: Is It Good or Bad?

1409 words - 6 pages that there should be higher dependency on direct taxes like income taxes and property taxes, than on indirect taxes like the value-added tax (VAT). The situation has been worsen by the increase of VAT from 10 percent to 12 percent. Collections from direct taxes are not high enough. The level of inefficiency and leakages in the collection of direct taxes is terrible. Income taxes, for example, lend themselves to bargaining and negotiation between

Fi515 Build a Model 13-11

1672 words - 7 pages . Ehrhardt Page 3 12/13/2011 Ch13 Tool Kit.xlsx Corporate Valuation Total value of firm Find the value of equity. Total value of firm Minus: Value of debt Minus: Value of preferred stock Value of equity Find Market Value Added (MVA) Total value of the firm Minus: Book value of debt Minus: Book value of preferred stock Minus: Book value of equity Market value added (MVA) $678.27 $678.27 $247.00 $62.00 $369.27 $678.27 $247.00

Communications

3130 words - 13 pages the same. And finally the value added tax is another proposal to replace the current progressive system. The value added tax (VAT) is a consumption tax that taxes all of the materials at different stages in the production chain. This could be applied to both manufactured goods and services. The VAT tax runs contrast to the more familiar progressive system of income tax that taxes wages, salaries and return on savings. It would be very difficult to

Disribution Strategy For Gallo

297 words - 2 pages support of an executive office are sufficient. Whereas further expansion will conflict with trade barriers and local protectionism. Areas have to be treated separately and high transaction costs are necessary to build own distribution channels. However, the advantages of higher reliance and lower control costs are obvious. Import taxes in China a lowered according to WTO agreements (9), but still 14% (10) plus value-added and consumption tax. Whereas Honk Kong tries to create a wine trading hub with the exemption of import taxes since 2008 (6).

Riordan Industries Week 3

925 words - 4 pages . Most PP&E assets loss the largest part of the value in the first year, senesce accounting practices assume that the company will use the PP&E for its useful life the depreciation expense is spared evenly though out the PP&E’s useful life. All expenses are added together to get the total expenses. The net income is found by subtracting revenues from the total expenses. Roirdan Industries income statement calls this line Profit before Taxes

Goods and Service Tax

1071 words - 5 pages base. There will be no distinction between goods and services. It will not be an additional tax. CGST will include central excise duty (Cenvat), service tax, and additional duties of customs at the central level; and value-added tax, central sales tax, entertainment tax, luxury tax, octroi, lottery taxes, electricity duty, state surcharges related to supply of goods and services and purchase tax at the State level. What would be the

Case Analysis

873 words - 4 pages . As shown below depreciation is added back because it is a non-cash item which is deducted from revenue on the income statement. Because the company seemed to be in a growth stage as they were heavily investing in fixed assets, they must depreciate those assets based on their useful life. Another major account impacting Prime’s cash flow statement is deferred income taxes. Deferred tax is a non-cash item; under the indirect method, deferred

Modern Finance Key

4031 words - 17 pages CHAPTER 2 FINANCIAL STATEMENTS AND CASH FLOW Answers to Concepts Review and Critical Thinking Questions 1. True. Every asset can be converted to cash at some price. However, when we are referring to a liquid asset, the added assumption that the asset can be quickly converted to cash at or near market value is important. 2. The recognition and matching principles in financial accounting call for revenues, and the costs

Mini Case

609 words - 3 pages Equity MVA 2009 = $850,000-$663,768= $186,232 MVA 2010 = $600,000-$557,632= $42,368 Between the years of 2009 to 2010 Computron’s market value added (MVA) decreased. i. Tax Liability = $100,000 (operating income) + $5,000 (Interest income) + $3,000 (Dividend income = $10,000*30%) = $108,000 of taxable income Used chart on PG. 71 (Chapter 2) Taxes = $22,250 + 0.39(108,000 - $100000) = $25,370 (Tax Liable) j. California = 0.07($5,000

Auditing & Taxation

1063 words - 5 pages Assignment On Impact of Indirect Tax in the Economic Growth of Bangladesh Submitted to Shish Haider Chowdhury Course Instructor Auditing & Taxation Submitted By Sudipta Paul Class ID-1577 21st Batch Date of Submission 07.09.2014 Institute of Business Administration Jahangirnagar University Indirect tax: An indirect tax (such as sales tax, a specific tax, value added tax (VAT), or

Related Essays

Pdf, Docx, Wps, Odt Essay

925 words - 4 pages seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs. The purpose of VAT is to generate tax revenues to the government similar to the corporate income tax or

Goods And Services Tax Essay

657 words - 3 pages Goods and Services Tax-What it is! Folks! Goods and Services Taxes or simply put GST is believed to solve many issues when it comes to the taxation policy in India. Before we jump into the technicalities of GST, let me set some pretext for those who have little idea about this topic. Our country, India, is a land of Taxes! Currently, we have numerous taxes like Sales Tax, Value Added Tax, Service Tax, Income Tax, Central Excise, Customs

Business Related Issues Essay

5124 words - 21 pages income/amount increases. 4. Regressive Taxes The opposite of a progressive tax is a regressive tax where the tax rate decreases as the taxable income/amount increases. 5. Proportional Taxes In between is a proportional tax, where tax is fixed as the amount to which the rate is applied increases Value Added Tax Background The origin of Value Added Tax (VAT) can be traced as far back as the writings of F Von Siemens, who

Public Finance Essay

2474 words - 10 pages sales tax, are all harmful to the economy. These types of taxes distort trade and cause deadweight losses in the economy. In today’s world economy of free trade, countries should advocate lower tariffs’ and allow the flow of goods and services to its most productive uses. Income tax, sales tax, value added tax (VAT) and similar types of tax cause a deadweight loss and discourage consumption, therefore they disrupt production. Consumption and