What are some examples of a value-added tax? Maverick Updated February 7, — 9:
What are some examples of a value-added tax? Maverick Updated February 7, — 9: A value-added tax VAT is a consumption tax levied on products at every point of sale where value has been added, starting from raw materials and going all the way to final retail purchase.
Ultimately, the consumer pays the VAT; buyers at earlier stages of production receive reimbursements for the previous VAT they've paid. VAT is commonly expressed as a percentage of total cost.
A VAT system is often confused with a national sales tax. With a sales tax, the tax is only collected once — at the final point of purchase by a consumer — and so only the retail customer ever pays it.
The VAT system is invoice -based and collected at several points throughout an item's production, each time value is added and a sale is made. Every seller in the production chain charges a VAT tax to the buyer, which it then remits to the government.
The amount of tax levied at each sale along the chain is based on the value added by the latest seller. Example of Value-Added Taxation To calculate the amount of VAT a consumer or business must pay, take the cost of the goods or service, and subtract any material costs previously taxed.
A manufacturer of electronic components purchases raw materials made out of various metals from a dealer. The manufacturer remits 10 cents of the cent VAT it collected to the government, the other 10 cents reimbursing it for the VAT it previously paid to the metals dealer. It pays 10 cents of this VAT is paid to the government; the other 20 cents reimburse the cell phone manufacturer for the previous VAT it has paid to electronic component company.
The fact that VAT is charged at each stage of production rewards tax compliance and and acts as a disincentive from operating in the black market: Retail businesses have incentives to collect the tax from consumers, since that is the only way for them to obtain credit for the VAT they have paid in buying their goods wholesale.
A VAT is also supported as a better alternative to so-called hidden taxes. Because it is typically levied at the same percentage on different products and services, a VAT tends to have less of an impact on economic decisions than an income tax.
Still, it can register on a country's economy. Unlike a progressive tax like the U.(b) The amount of the interest payments for the art indebtedness must be determined as follows, after reducing the total amount of the art indebtedness by any reduction in principal calculated pursuant to paragraph (a), reducing the total amount of the principal of the indebtedness by the principal payment or other reduction and increasing the total amount of the principal of the indebtedness.
The European Union value added tax (or EU VAT) is a value added tax on goods and services within the European Union (EU). The EU's institutions do not collect the tax, but EU member states are each required to adopt a .
A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally, based on the increase in value of a product or service at each stage of production or distribution.
VAT essentially compensates for the shared services and infrastructure provided in a certain locality by a state.
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Understand the value-added tax, how it works and how it differs from a traditional sales tax, and the arguments for and against it. This guide summarizes the value-added tax, goods and services tax and sales tax systems in jurisdictions. Use the map or the menu to see the guide’s information.
Use the menu to see the guide’s information.