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Value added tax
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Abstract
A value added tax(VAT)is a form of consumption tax．It is a tax on the”value addeddouble dribble”to a product or material，from an accounting view, at each stage of its manufacture or distribution．The”value added”to a product by a business is the sale price charged to its customer，minus the cost of materials and other taxable inputs．kimikoA VAT is like a sales tax in that ultimately only the end consumer is taxed．It differs from the sales tax in that，with the latter，the tax is collected and remitted to the government only once．at the point of purcha by the end consumer．With the VAT, collections，remittances to the government，and credits for taxes already paid occur each time a business in the supply chain purchas products from another business. The reason business end up paying no
tax is that at the time they ll the product，they receive a credit for all the tax they have paid to suppliers担心的意思．
Personal end-consumers of products and rvices cannot recover VAT on purchas，but business are able to recover VAT(input tax)on the products and rvices that they buy in order to produce further goods or rvices that will be sold to yet another business in the supply chain or directly to a final consumer．In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products，and most of the cost of collecting the tax is borne by business，rather than by the state．Value Added Taxes were introduced in part becau they create stronger incentives to collect than a sales tax does．Both types of consumption tax create an incentive by end consumers to avoid or evade the tax．But the sales tax offers the buyer a mechanism to avoid or evade the tax--persuade the ller that he is not really an end consumer，and therefore the ller is not legally required to collect it．shotsThe burden of determining whether the buyer’S motivation is to consume or re-ll is on the ller．but the ller has no direct economic incentive to the ller to colle
ct it．The VAT approach gives llers a direct financial stake in collecting the tax，and eliminates the problematic decision by the ller about whether the buyer is or is not an end consumer．
Chapter I Comparison with a sales tax
Value added tax(VAT)avoids the cascade effect of sales tax by taxing only the value added at each stage of production．For this reason，throughout the world，VAT has been gaining favor over traditional sales taxes．In principle，VAT applies to all provisions of goods and rvices．VAT is assd and collected on the value of goods or rvices that have been provided every time there is a transaction (sale/purcha). The ller charges VAT to the buyer, and the ller pays this VAT to the government．If however, the purchar is not an end ur，but the goods or rvices purchad are costs to its business, the tax it has paid for such purchas can be deducted from the tax it charges to its customers．The government only receives the difference；in other words，it is paid tax on the gross margin of each transaction，by each participant in the sales chain．
Sales tax is normally charged on end urs(consumers)老师您辛苦了英文．The VAT mechanism means that the end—ur tax is the same as it would be with a sales tax．The main difference is the extra accounting required by tho in the middle of the supply chain； this disadvantage of VAT is balanced by application of the same tax to each member of the production chain regardless of its position in it and the position of its customers, reducing the effort required to check and certify their status．When the VAT system has few, if any, exemptions such as with GST in New Zealand，payment of VAT is even simpler.
A general economic idea is that if sales taxes exceed 1 0％，people start engaging in widespread tax evading activity(1ike buying over the Internet，pretending to be a business，buying at wholesalegetup，buying products through an employer etc. On the other hand．total VAT rates can ri above 1 0％without widespread evasion becau of the novel collection mechanism．However，becau of its particular mechanism of collection，VAT becomes quite easily the target of specific frauds like caroul fraud, which can be very expensive in terms of loss of tax incomes for states.
1.1 Principle of VAT
The standard way to implement a VAT involves assuming a business owes some percentage on the price of the product minus all taxes previously paid on the good. If VAT rates were 10％，空中瑜伽培训an orange juice maker would pay 10％of thecommander in chief￡5 per litre price (￡0.50)minus taxes previously paid by the orange farmer(maybe￡0.20)．In this example，the orange juice maker would have a ￡0.30 tax liability. Each business has a strong incentive for its suppliers to pay their taxes，allowing VAT rates to be higher with less tax evasion than a retail sales tax．Behind this simple principle are the variations in its implementations，封闭as discusd in the next ction．
1.2 Basis for VATs
By the method of collection. VAT can be accounts-bad or invoice-bad. Under the invoice method of collection, each ller charges VAT rate on his output and pass the buyer a special invoice that indicates the amount of tax charged. Buyers who are subject to VAT on their own sales(output tax)，哈佛大学入学条件consider the tax on the purcha invoices as input tax and can deduct the sum from their own VAT liability. The difference between output ta
x and input tax is paid to the government (or a refund is claimed，in the ca of negative liability). Under the accounts bad method，no such specific invoices are ud．Instead，the tax is calculated on the value added, measured as a difference between revenues and allowable purchas. Most countries today u the invoice method, the only exception being Japan, which us the accounts method.
