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No. You have it wrong. Every stage in the pipeline *pays* VAT inclusive prices to their suppliers and totals up their input tax and then charges their customers including VAT and totals up their output tax. Then every month if large or three months if a small company you send a VAT cheque to HMRC which is the difference of those two numbers.

A modern computer system doesn't find this too difficult. Unless that is some half baked government changes the VAT rate from 17.5% to 15% in the run up to Christmas as they did last year. That was a disaster for shops as shelf prices are all marked inclusive of VAT. UK VAT is expected to go to 20% shortly to deal with the deficit. It will make mental arithmetic a lot easier - I never learnt my 17.5x table.

Exceptions exist for cross boarder trades in the EEC which allow not charging VAT if the goods are for export to another country in the EEC. This leads to a complex form of cross border trade called carousel fraud which typically involves small high value objects like memory chips, mobile phones and latterly carbon credits.

A pure sales tax paid only by the non-business end user would be a lot simpler. Allowing businesses not to have to fight with badly paid VAT advisers. I have had some amusing run-ins with them on reclaiming VAT for a charity making disabled access improvements.

Regards, Martin Brown

The alternative was to let them go bankrupt, taking down a bunch of Eurpean banks that had lent them money. This is pretty much what happend in 1929, and the relevant politicians know enough history to be aware of this, and didn't fancy going down that route again.

Right-wing nitwits are less familiar with history, and correspondingly more enthusiastic about repeating their ancestor's mistakes.

Make no mistake. The Greeks are in the process of reforming their economy. Already public servants are getting 10% lower salaries, and their retirement age has been raised from 61 to 65. There's a lot more of that kind of belt-tightening in the pipe-line.

-- Bill Sloman, Nijmegen

It's a little more complicated

but in essence it is a properly worked out application of the same basic idea. The French governemnt gets more than 50% of it revenue from VAT.

Because it is a tax on consumption, rather than income, the poor pay out a larger proportion of their income in VAT than do the rich, who are in a position to save and invest more of their income. It consequently appeals to right-wing nitwits, who have a rather ideosyncratic understanding of the word "fair".

-- Bill Sloman, Nijmegen

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Dream on. Why do you think that VAT was invented?

It does seem inequitable to organise society so that the rich pay out a lower proportion of their - higher - incomes in tax than do the poor. It also means that the administration is extracting more of its income from people who feel the loss more keenly.

The rich don't like paying taxes any more than do the poor, but it's less painful to have to economise on luxuries than on necessities.

-- Bill Sloman, Nijmegen

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They are perfectly reasonable. but they don't have the same preconceptions as right-wing nitwits. Notably, they don't think that being rich is a condition that exempts you from paying your fair share of the costs of running your society. The rich make more use of the advantages of being members of a rich society - their children are over-represented in tertiary education, their cars do more miles per year on the roads, and the contents of their houses are more interesting to burglars, so the police have to work harder to protect them - and leftist have this idea that they should pay out a somewhat higher proportion of their income in taxes to compensate society for these extra costs.

-- Bill Sloman, Nijmegen

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Do try and find out something about VAT before telling us what is - and is not - possible.

And VAT is perfectly visible at the pointo of sale, which is the first point where the buyers can't recover the VAT on the stuff they have bought, because they aren't going to sell it on.

By "reasonable" krw would understand "sharing right-wing nitwit preconceptions" which don't happen to be all that rational, not that you would seem to be equipped to understand this.

-- Bill Sloman, Nijmegen

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But easily automated, unless you want to cheat. No place where I worked complained about the complexity or got worried about intrusions. European small business software packages claim to include it as a matter of course.

People who are sloppy about their paper-work can get in a mess with VAT, as with every other item of accounting, but at least it isn't hard to understand.

-- Bill Sloman, Nijmegen

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Actually, Countries in Europe have that in the VAT system. IIRC Germany has several VAT levels, the one on uncooked food and groceries is around half of the regular rate. Which is sky-high to begin with and, of course, they also have an income tax.

A serious problem with that: It punishes frugal people who have saved for their retirement and rewards those who squandered everything. The money they saved _has_ already been taxed. An additional flat sales tax would increase their cost of living instantly by 10% or whatever. Not fair at all.

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And they are _not_ simple at all. While in Europe I had to file business taxes and there was an intricate VAT refunding scheme you had to follow for business stuff. This regularly led to questions from their tax agencies because I also had foreign clients which did not have to pay VAT on my services.

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No. It's typically collected every time something is sold (unless exempt, like food). There is a bureaucratic process to get it refunded for stuff that was not used at the end of the chain.

It's probably like in Europe but not sure: If a non-exempt company buys a scope or something else they have to fork out the VAT. Then file for a refund, along with all other VAT declarations.

There's a good argument that the government interventions in the '30s created a decade-long depression that otherwise would have been a year-or-so stock market bust. The "success" of the Roosevelt acts has entered our mythology.

It's not as though economists understand any of this stuff.

History records that we had stock market bubbles and busts for hundreds of years before 1929, and that the first great government intervention in such a bust was followed by the first Great Depression.

Beginning with a general strike.

Already public servants are getting 10% lower salaries, and

When "public servants" getting a 10% pay cut has serious effects on an economy, you know that you have way too many "public servants."

John

Yeah, he wouldn't understand a female plumber making $150K.

What created our modern wealth was engineers applying science.

John

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And then you get a letter from the tax agency, asking for some explanation why your VAT intake was so low and you claimed so much in refunds. "Because I run a business, are VAT-exempt for that, and have clients in places like Asia" ... "Can you come by with the books and show us?" ... "Sure". It was a nice bicycle ride through a forest so I didn't mind. The guy there was very friendly but became quite frustrated because nearly all the stuff was in foreign languages, some in Korean :-)

IIRC we had 6 or 7 VAT rates and you really had to watch your data entry. At the "Pre-computer" point.

The usual. To squeeze ever more taxes out of people. Whether you call them VAT, fees, surcharges, carbon credits or whatever, a tax is a tax is a tax.

It only makes sense if the money comes from somewhere. If all the employers arbitrarily doubled wages, inflation would take it all away within weeks, maybe days. If a single employer did it, he's go out of business. Shuffling paper money around is meaningless; productivity is real. Ford increased wages because he had a revolutionary super-efficient way of making cheap cars, and most workers found the pace and discipline tiring and tended to quit after a few months. He needed the best workers to stick around, so he golden-handcuffed them; this was *before* they were unionized. The "invisible hand" was at work. Productivity was the key.

This is good:

A decent industrialist realizes that a partnership with workers is mutually beneficial, but must still compete with company owners who don't agree with this philosophy. A company can't arbitrarily give away high wages without achieving corresponding competitive benefits.

John

And--don't forget--to hide the deed, hence the prestidigitation.

My favorite accountant says spotting fraud is easy--she just looks for unreasonable complexity. Like VAT.

Yup.

-- Cheers, James Arthur

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Taxes are scarcely any inconvenience at all to the people who don't pay them.

You made something. That was your mistake.

James

Yep. They made machines to relieve human toil, to improve the human condition.

Evil capitalists. Marx the Moocher should've stopped 'em.

-- Cheers, James Arthur

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There's nothing wrong or difficult about having businesses pay sales tax. We in California pay sales tax on anything we consume, like equipment and furniture and supplies, and pay no tax on parts or subassemblies that will go into sellable products. But it probably makes sense to exempt productive equipment, since that would encourage long-term productivity and job creation.

If there's an opamp in stock and I pull it out to make a breadboard or a test fixture, I should in theory note the event and pay sales tax on it. And if I buy a bunch of parts for engineering, taxed, but some wind up in a shipped product, we should get a refund on the taxes.

VAT sounds like a mess to me. Accountants and attorneys and bureaucrats are all useless, expensive overheads on society.

John