Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP
Posting-Version: version B 2.10.1 6/24/83; site watmath.UUCP
Path: utzoo!watmath!atbowler
From: atbowler@watmath.UUCP (Alan T. Bowler [SDG])
Newsgroups: can.politics
Subject: Re: VAT
Message-ID: <9875@watmath.UUCP>
Date: Fri, 16-Nov-84 12:52:24 EST
Article-I.D.: watmath.9875
Posted: Fri Nov 16 12:52:24 1984
Date-Received: Sat, 17-Nov-84 04:09:05 EST
References: <844@ubc-cs.CDN>
Reply-To: atbowler@watmath.UUCP (Alan T. Bowler [SDG])
Organization: U of Waterloo, Ontario
Lines: 27

Normally what is called a value added tax (VAT) is fixed at
all stages in production.  Hence the percentage of the final
price is the same no matter how many stages there are.  The
difference is that the tax has been collected in several stages. In your
example, an item which uses $.50 of raw materials, and which a manufacturer
wants to sell to $.50 above that to cover manufactuing costs and profit
still sells for $1.10, but the tax was collected as 5 cents and 5 cents.
The manufacturer paid $.55 for his raw materials, he charges his customers
$1.10.  He remits to the goverment 10% of his sales (10 cents) less
10% of his taxable raw materials (5 cents).  This makes the system
moderately self policing, since your net sales are easy to find
the way to minimize the amount of money your company remits to the
goverment is to report accurately the amount you paid your suppliers,
hence the government has an independant check of what the supplier
sold (i.e. it knows what his net sales were).  The system is designed
to really make honesty the best (or at least an very good) policy.
   Wheither this is more or less paperwork than the present system
is not clear.  True, more the tax is collected in more stages,
but at present there is paperwork submitted at each of these stages
to show that the recipient is not the real end user, and so tax
is not due there is no ongoing monetary incentive (other than the
threat of legal action and fines) to make sure that this paperwork
is accurately reported.
   This is or course how a VAT is supposed to work.  That is, a simplified
sales tax system with no complex exception list.  What relation this
has to what the politicians implement call a VAT is not clear.
Simple no exception rules are not a politician's bread and butter.