Talk:Value added tax

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Contents 1 Critisism of a Critisism of VAT 2 External Links 3 Hyphen 4 VAT and international purchases 5 6th VAT directive 6 Invention of VAT 7 Reality check of VAT 8 Vat compared to sales tax 9 Indonesia GST 10 zero-rated vs exempt - major factual error 11 Internal Links 12 Sales tax vs VAT again 13 Sales tax in example 14 Merge with Impuesto_al_Valor_Agregado 15 VAT, Gross Value and Net Value 16 Should this be someone or something 17 VAT REFUND --- It's possible 18 VAT & sales tax yet again 19 Criticism of apportioned tax collection 20 Customs duty 21 Sales tax against VAT once more 22 included in price tag 23 Rules on pricing within the EU 24 VAT in India

[edit] Critisism of a Critisism of VAT

"Since VAT requires the purchaser to pay input VAT up-front, there is a requirement for additional cash - or, looked at another way, VAT collected is loaned to the government throughout the production and sales cycle. In industries with long sales cycles, the additional funding requirements may be significant, although the details will depend on VAT administration - for example, whether input VAT can be reclaimed before output VAT is collected from customers."

I believe this statement to be incorrect. As this is a Value Added Tax the tax collected by the purchaser will of course be greater than the tax paid on the inputs (i.e. the credits yet to be recieved). Thus it could be considered to be an interest free Loan from the government, with the company finding itself holding the extra tax income, investing as it pleases until the cycle is up.

This is of course assuming that Production is not just starting from scratch. But even if the timing of the cash flows were quite far apart, the only time it could be in the governments advantage would be if the inputs were purchased shortly after end of period, and the cash inflows were shortly before the end. Thus I am removing the paragraph, but am happy to have it placed back after some hearty discussion! :) --DennyCrane 11:06, 5 June 2006 (UTC)

195.217.52.130 14:50, 14 March 2007 (UTC)

You are right theoretically, but your comments ignore practical reality where a number of countries that operate a VAT system do not always refund input tax credits in an expeditious manner. In many cases, VAT can become "locked" in the system. Try recovering your import (input) VAT in Greece, for example and you'll see what I mean. There are certain timing advantages to be had in certain circumstances, but in my experience it is rare to see taxpayers enjoying these advantges unless they are engaged in active planning (not avoidance or evasion for that matter) to manage their VAT cashflow.

Madcactus

'Criticism' section, 2nd paragraph, 1st sentence. Citation needed for this claim.

--167.206.169.135 19:55, 27 March 2007 (UTC)

[edit] External Links

Is it correct that there is a link to a commercial website (INSATAX) in the External Links at the bottom of the page?

--IMO that should be removed. There was an ad for that on the VAT disambiguation page as well (I removed it).

[edit] Hyphen

Surely it should be value added tax, no hyphen, not value-added tax? See, for example: (1), (2), (3) -- ALoan 00:48, 22 May 2004 (UTC)

According to the traditional rules pertaining to hyphens there should be a hyphen. But the traditional rules, still used in newspapers and magazines, and in many novels, are no longer used by advertising copy writiers nor by those who write labels on packages, nor by lots of educated English-speaking people. But I think its a good idea to follow the newspaper-and-magazine usage, for reasons that are explained in the article titled hyphen. Michael Hardy 21:39, 8 Aug 2004 (UTC)

Yes, I agree that the traditional rules would indicate that a hyphen should be used; unfortunately, until the Sixth Directive, the Value Added Tax Act 1994 and sundry other legislation is amended, the name of the tax in the EU in general and the UK in particular (however technically incorrect) is actually "value added tax" and not "value-added tax". -- ALoan (Talk) 01:52, 10 Aug 2004 (UTC)

[edit] VAT and international purchases

I live in the United States. If I buy something from a EU country via the net, catalog or other means do I have to pay the VAT?

In general, that would be considered an export sale and zero rated. In other words no VAT. You may, however, be subject to use tax in your state.

Yeah, in theory no. But some places don't remove the VAT charge. I know this since, even though all sales within the EU are meant to be charged in the rate of the destination, some places just charge local VAT (although that is technically illegal) - RedHotHeat 17:12, 22 October 2005 (UTC)

[edit] 6th VAT directive

What's this with the 6th VAT directive, or the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment? Where are the other five? Is this the sixth version? No, it isn't because it is still inforce today, and I can't imagine the 1977 VAT law would be todays', so where does it do refer to? -- Daniël on 11:52, 29 Mar 2005 +0100

VAT law in the EU is indeed based on the almost 30-year-old Sixth Directive, although it has been amended and augmented many times since then. 30 years is nothing: in the UK, stamp duty is still largely based on the Stamp Act 1891.

The Council Directives relating to VAT were numbered sequentally from the First and Second VAT Directives in 1967 through to (at least) the Eighteenth VAT Directive in 1989. More recent directives are not numbered in the same way.

The Sixth VAT Directive is the "Sixth Council Directive 77/388/EEC of 17 May 1977..." - the five before that are:

1. First Council Directive of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes (67/227/EEC)
2. Second Council Directive of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes - Structure and procedures for application of the common system of value added tax (67/228/EEC)
3. Third Council Directive of 9 December 1969 on the harmonisation of legislation of Member States concerning turnover taxes - Introduction of value added tax in Member States (69/463/EEC)
4. Fourth Council Directive of 20 December 1971 on the harmonization of the laws of the Member States relating to turnover taxes - Introduction of value added tax in Italy (71/401/EEC)
5. Fifth Council Directive on the harmonisation of legislation of Member States concerning turnover taxes (72/250/EEC) (Not available in English: the French title is "Cinquième directive du Conseil, du 4 juillet 1972, en matière d'harmonisation des législations des États membres relatives aux taxes sur le chiffre d'affaires - Introduction de la taxe à la valeur ajoutée en Italie" (72/250/CEE) )

Most of the early Directives are now irrelevant, although parts of the First Directive remain in force. There are proposals to rewrite the Sixth Directive, incorporating the subsequent amendments - see this PDF (warning: 453 pages, 2.4MB) which may bear fruit in the next year or two. -- ALoan (Talk) 12:09, 29 Mar 2005 (UTC)

So if I understand this correctly, there are 18 European directives regarding VAT, but the Sixth is the paramount? Thanks for your quick and extensive reply! -- Daniël on 13:29, 30 Mar 2005 +0100

There were 18 VAT directives until 1989, but there have been a few more since then. You should be able to find more details from http://www.europa.eu.int But yes, the Sixth VAT Directive is currently the most important. -- ALoan (Talk) 11:37, 30 Mar 2005 (UTC)

As of 1 January 2007 a new EC directive has replaced the Sixth Directive. The Council has abandoned the protocol of numbering the directives in the title and the new directive, Council Directive 2006/112/EC, is commonly referred to as the VAT Prime Directive (is this a subtle nod to Star Trek by taxation geeks?)Theaardvark 23:15, 20 February 2007 (UTC)

[edit] Invention of VAT

I don't think it was invented as late as the 50s by the French. It's true that they were particularly influential in getting it embedded in what was then the EEC, but I am pretty confident that the idea was around in Germany in the interwar years. If anyone has a copy of the Neumark Report handy, it may include a history section.

I used to be a VAT Officer for HMC&E in the UK. When I joined we were told during training that VAT was invented in Germany in the 1800s. The French merely refined it and then encouraged its implimentation across Europe. Many of VAT's problems stem from the fact that it was designed for a mainly manufacturing economy and doesn't work too well with today's wide range of services and goods. Theaardvark 16:17, 30 August 2005 (UTC)

This is interesting (as I was under the impression that it was the French): can you provide a source or reference? -- ALoan (Talk) 22:11, 10 September 2005 (UTC)

No, it was definitely around before the 1950s, as a concept at least. I'm a VAT Accountant, and I've always been told its Germany in the 1830s and 1840s where it began. France was just the first to put it to use... Andy C 20:14, 15 May 2006 (UTC)

[edit] Reality check of VAT

I think this wiki is not complete without some reality check, such as

VAT economy impact

Does VAT works as it claim?

How organisation take advantage of VAT

etc

Thank you for your suggestion! When you feel an article needs improvement, please feel free to make whatever changes you feel are needed. Wikipedia is a wiki, so anyone can edit almost any article by simply following the Edit this page link at the top. You don't even need to log in! (Although there are some reasons why you might like to…) The Wikipedia community encourages you to be bold. Don't worry too much about making honest mistakes—they're likely to be found and corrected quickly. If you're not sure how editing works, check out how to edit a page, or use the sandbox to try out your editing skills. New contributors are always welcome. -- ALoan (Talk) 22:13, 10 September 2005 (UTC)

[edit] Vat compared to sales tax

The article claims "they tend to compound, growing into very high tax rates on products with numerous stages of production done by different economic units. This discourages specialization and, instead, encourages integrated production units even when integration (e.g., from raw materials to final product) is less efficient." Immedietly following this is an example which shows exactly the same tax paid for a VAT and a US style sales tax. Perhaps the example was not intended to demonstration this earlier claim in which case it should be moved somewhere else since the current article layout is confusing.60.234.141.76 11:41, 24 August 2005 (UTC)

I think a part of the article is non NPOV:

On the "comparison" between VAT to sales tax, initially it's argued that "since sales taxes are applied to the total price at each stage of production, they tend to compound, growing into very high tax rates on products with numerous stages of production done by different economic units".

I find this too much USA-centric (or at least, to much sales-tax promoting) and non NPOV, for it implies that a sales-tax is supperior to a VAT style tax. Furthermore, it fails to explain why (in the opinion of the author of these lines) the VAT "encourages integrated production units even when integration (e.g., from raw materials to final product) is less efficient"

In addition, the accompanying example also discredits this claim: If, according to the example, under ideal conditions the final consumer price is the same, the lower purchase value of goods in a sales-tax environment doesn't benefit the end consumer. So paying less for a good doesn't benefit a retailer with higher sells: it ends up selling the same (if consumers are paying the same in the end, they see no incentive buying more), retailers also profit the same, and pay the government the same amount. Intermediate vendors indirectly benefit or suffer from the increased or decreased sales to final consumers, so in the end they don't benefit either from a sales-tax.

Furthermore, one could argue (giving away a VAT promoting non NPOV) that a VAT system helps simplify managment and accounting by impossing a universal tax system on every business, whether it sells to other businesses or to final consumer - thus aiding a business in the process of transission from one type to another, should a business try to change its business strategy (from final vendor to intermediate)

It is not NPOV - it is wrong. VAT does not compound - because it is refunded on inputs, it is economically equivalent to a tax on final sales. The issue is accounting: intermediate sellers must charge and reclaim VAT (bad) but they do not have to check the status of their customers (good). I am changing it --Henrygb 13:40, 7 October 2005 (UTC)

It is still not NPOV. Does not take into account the fundamentals of economics & elasticities of demand. Example is only acceptable for goods of 0% elasticity of demand. Will fix it, and remove NPOV. --Zenosparadox

Upon reflection, there is no way to recocile the example with a true npov. One can, however, point out the limitations, as I'll do. --Zenosparadox

I think the comparison between VAT and sales tax is not NPOV, the many steps in the VAT description compared to the sales tax and the general "tone" in that section implies that VAT is more complicated than sales tax; thus a bad system. However in reality VAT is easier since for a company you treat all sales the same - independant of who is the buyer. When you buy stuff you just track the VAT of these boughts in the bookkeeping system and then when you declare (to "IRS") VAT yearly / montly (depending on size of business) you just declare VAT in+out and then pay (or recieve) the difference. VAT removes any need to check wether the customers is companies or privat persons; which I would say make VAT a better system than sales tax. It is a more "beautiful" solution to the same (horrible imo) problem. The declaration can, of course, be done via internet and does not have to create lots of paperwork.

Exactly. It is also the reason why some countries (such as NZ) don't bother with all the less VAT for food and extra complications that other countries like many EU and Aust have. These make VAT/GST more complicated which some feel defeats the purpose. I think we need to explain better the simplicity of VAT/GST and also mention the difference in simplicity and how this affects things. Nil Einne 10:40, 4 November 2005 (UTC)

[edit] Indonesia GST

I've seen it written elsewhere that Indonesia has a 10% GST. Can anyone confirm this and if so, add it to the list

[edit] zero-rated vs exempt - major factual error

There is a major factual error in this article. In paragraphs 4-6 of the "VAT in the European Union" section it implies that zero-rating and exemption are effectively the same thing. They aren't. Goods that are zero-rated allow the business to claim input tax back on the intermediate goods of the business (for instance, a supermarket can claim the VAT back on shelving and checkouts). However, for exempt goods the business cannot do this (so a private school cannot claim VAT back on tables and chairs it buys for classrooms).

This makes a huge difference. If a "proper" accountant can verify this, the article should be amended.

There is some info here: [1] Rob 13:34, 20 September 2005 (UTC)

"Proper accountant"? We are not all teenage computer geeks, you know. Some of us have real jobs and everything.

You will not find any reference to "zero rating" in the Sixth VAT Directive. As the article describes, supplies that are "zero rated" are exempt from VAT, in so far as the supplier does not charge any VAT to the customer, but VAT on related inputs is recoverable. Describing these sorts of supplies as taxable, but with tax being charged at a rate of zero, is just a different way of saying the same thing. -- ALoan (Talk) 23:49, 21 September 2005 (UTC)

ALoan - what I meant was I'm not a proper accountant (and I too fall into the not-a-computer-geek-and-have-a-real-job category).

The point I was trying to make was that there are goods that are zero-rated, where VAT on inputs is recoverable, but there are also exempt goods and services (like education services) where VAT on inputs are not recoverable but VAT is not charged on the end goods or services. Rob 19:19, 22 September 2005 (UTC)

I am a professional VAT consultant. There is a very important difference between zero-rate and exempt VAT liabilities. The zero-rate is a positive rate of tax calculated at 0%. Supplies subject to the zero-rate are still "taxable supplies", i.e. they have VAT charged on them. Exempt supplies are exactly that; they are exempt from VAT. In most cases companies will be able to recover VAT on costs that are incurred in making taxable supplies but will not be able to recover VAT on the costs that are incurred in making Exempt supplies.

The Sixth Directive does not make reference directly to zero-rating as it was not intended to be a feature of VAT in Europe. However zero-rating remains in some Member States, most notably the UK, as a legacy of pre-EU legislation. These Member States have been granted a derogation to continue existing zero-rating but cannot add new goods or services. Hence, in the UK, the introduction of the 5% rate (the minimum allowed under the Sixth Directive) supplies that subsequent Govts have deemed should be subject to a reduced rate.Theaardvark 09:15, 19 October 2005 (UTC)

Thanks Theaardvark - that's exactly what I was trying to say, just written much better! Rob 20:26, 28 October 2005 (UTC)

I am wondering why this article doesn't contain any reference to VAT exempt transactions (or zero-rated according to UK terminology) relating to exports, intra-Community supplies of goods and related transactions (i.e. Articles 14 to 16 of the 6th EC Directive). Or did I miss something?--212.76.233.172 22:34, 8 January 2006 (UTC)

[edit] Internal Links

The link to the equivalent german article and vice versa is incorrect. It links to "Umsatzsteuer" (which would be the sales tax) instead to "Mehrwertsteuer".—The preceding unsigned comment was added by 141.21.4.8 (talk • contribs) 18:10, 21 October 2005.

The official name of the VAT in Germany is "UmsatzSteuer", and the official name of the German VAT Code is "Umsatzsteuergesetz", usually referred to in Germany as "UstG". By the way, the VAT is also regarded as a turnover tax and replace all the turnover taxes systems that were in use before in the Member States before 1970 (for six first ones) or their accession to the European Union.--81.241.235.166 15:26, 9 January 2006 (UTC)

What is Mehrwertsteuer then? That is what we have all always learned as the German for VAT. That Umsatzsteuer can mean turnover tax, sales tax and VAT is a nightmare for a translator like me - any explanation?—The preceding unsigned comment was added by 212.144.232.233 (talk • contribs) 15:05, 7 March 2006.

Well, HMRC gives both names[2]:

'VAT' - in other languages (EC countries)

...

GERMANY

Mehrwertsteuer - VAT

Umsatzsteuer - Turnover Tax

This page says that both names are used interchangeably in Germany - typically, Umsatzsteuer is used for business-to-business supplies, and Mehrwertsteuer for the final supply to the customer. -- ALoan (Talk) 10:03, 10 May 2006 (UTC)

[edit] Sales tax vs VAT again

The argument has been improved but it still seems to be missing something, specifically it states that:

VAT, (as well as any other tax) distort what would have happened without it. Because the price for someone rises, not all the goods that would have been traded were there no tax are traded. Correspondingly, some people are more worse off than the government is made better off by tax income. In other words, a deadweight loss is created. The income lost by those being taxed is greater than the government's income; the tax is inefficient.

Okay I'm not an economist but this argument seems to be missing an important point. If someone is making less profit, that means this money has to go somewhere. It doesn't just disappear. The extra money can't go to the government since the tax rate is fixed. Therefore, I would assume it probably means the final cost of the product is less therefore the consumer pays less. If the consumer pays less, they have more cash which will either be invested, saved or spent. If I am totally wrong and I don't see how, can someone please explain and improve the article since I feel it is too technical for the layperson? Nil Einne 10:35, 4 November 2005 (UTC)

When thinking about it, I'm getting even more confused. When a person is making products, they need the raw material to make it. Either they buy all they need or they make less product, raising the price. So really, I fail to see how exactly VAT can be said to be worse then a sales tax in this regard. It's different but I don't see any way it can potentially be inherently worse then a sales tax. Nil Einne 10:43, 4 November 2005 (UTC)

There is an important additional function of VAT as a suppressant - cashflow. All inputs must be paid (cash outflow) inclusive of VAT. This money must come from somewhere. In many cases this is debt, with interest costs. If not debt then at the very least there is an opportunity cost (the money cannot be invested elsewhere). Sure there is VAT included in the sale price (cash inflow), but this is only received a while later. Therefore not only are intermediate companies administering and collecting VAT on behalf of governments, they are also financing it. Furthermore, if a customer is late paying, the intermediate company must still pay the VAT over to the government even if they have not themselves been paid yet, which can be a further huge drain on cashflow. This alone has put many companies out of business, and is a fundamental reason why (IMHO) VAT is a major contributor to the far, far lower GDP per capita of the EU when compared to USA.81.133.209.247 03:03, 13 January 2006 (UTC)

[edit] Sales tax in example

Why was this removed? The sales tax is conceptually simpler, and helps to illustrate the methodology. It is also useful for explaining VAT to those, for example, from the USA where sales tax is used but not VAT. Modest Genius ^talk 01:35, 10 May 2006 (UTC)

• Turns out it was deleted, along with some other stuff, in some missed vandalism a month back. I've fixed the problems Modest Genius ^talk 17:59, 14 May 2006 (UTC)

[edit] Merge with Impuesto_al_Valor_Agregado

I have merged this with Impuesto_al_Valor_Agregado as a request was pladed on this page for it to be merged. Let me know what you think. Allthough im thinking this article is getting abit big and we could split it in two and have on on the tax itself, and another on the Tax in other countries and their experiences with it. --DennyCrane Talk 05:19, 21 June 2006 (UTC)

[edit] VAT, Gross Value and Net Value

Could someone explain a bit the terminology about Gross Value, Net Value and VAT and how they are are related?

I believe that

Gross value being the price paid by the client. Net value the money received by the supplier. and VAT is the difference going to the tax office.

Gross Value = Net Value + VAT

Am I right?

It sounds simple but we many reader are not native English speakers.

[edit] Should this be someone or something

Because the price for someone rises, the quantity of goods traded decreases

Yes I agree this is a very minor point.

[edit] VAT REFUND --- It's possible

Many companies doing business through Europe are not aware that they are entitled to reclaim the Value Added Tax (VAT) charged on many of the expenses incurred by them. Those who are aware of this benefit and have tried to reclaim business related VAT have found it to be a difficult and time consuming exercise

WHO IS ELIGIBLE ? You are eligible to claim VAT refunds on certain business related expenses if you are registered in any country other than the country from which you wish to claim a VAT refund, and if you have no business activities in that country.

WHICH EXPENSES ARE ELIGIBLE ? Expenses incurred on hotels, meals, professional fees, car rentals, trade fairs, training courses, etc… Current legislation in the EU enables an applicant to claim VAT refunds up to 6 months after the end of the financial year in which the expenses were incurred. Vatexp 12:45, 16 November 2006 (UTC)

[edit] VAT & sales tax yet again

I'm a bit confused by something in the widget example. For the sales tax example, "the manufacturer pays $1.00 for the raw materials." In the VAT example, "the manufacturer pays $1.10 ($1 + 10%) for the raw materials." Shouldn't this have a huge impact on production? I think that's being talked about in the following section, but there's quite a lot of jargon there (or I'm an idiot :) ) and so it seems like it's inadequately addressed. Here on the talk page, it says there was once something in the article that suggested that the VAT encourages integration so as to avoid paying the VAT, and this seems logical, but is no longer addressed. RobertM525 23:06, 26 November 2006 (UTC)

In fact, for the manufacturer, as for any business in the supply chain, but the end consummer, the input VAT (i.e. the VAT paid on the purchases of goods and services used for business puposes) is deductible and settled against the VAT collected on the sales (i.e. VAT due). Only the difference between the VAT due and deductible is paid to the Treasury. This means that for the businesses, the VAT is in principle neutral and has no incidence on the costs incurred. --Lebob-BE 23:24, 27 November 2006 (UTC)

It is a temporary cost, though. Suppose the time of development is relatively large--the business has to float the difference. I have to assume this would have some effect. Enough to encourage consolidation to avoid it? I have no idea. But I don't think the idea was totally off the deep end. RobertM525 08:16, 28 November 2006 (UTC)

It's true that timing differences in payment/deduction of the input VAT or collection/payment of the output VAT may have cash-flow effects (the "pre-financing fo the VAT) and become an issue for some undertakings. When available some avoidances schemes may be put in place for instance in using "reverse charge mecanisms" (if applicable) or used alternate scheme as inboud (customs) warehouse schemes.

Moreover, the control and collection of the VAT entails some obligations for the undertakings like keeping a appropriate bookkeeping and issuing invoices compliant with the VAT regulation. Finally, undertakings that make mistakes in the proper application of VAT may have to pay penalties of late payment interest (at least in most member States of the European Union).--Lebob-BE 17:21, 28 November 2006 (UTC)

[edit] Criticism of apportioned tax collection

This recently added "reference" from Vincent44:

This article is in itself its own reference. The reader can, immediately and by his/her own means verify its validity

reinforces my initial impression that the entire section is Original Research. If so it should be removed. Pm67nz 22:00, 4 December 2006 (UTC)

Thanks for opening the discussion.

Removing this article on the Original Research Policy basis raises two issues.

1. The original idea behind this policy is, according to J. Wales, Wikipedia’s founder: “It can be quite difficult for us to make any valid judgment as to whether a particular thing is true or not. It isn't appropriate for us to try to determine whether someone's novel theory of physics is valid; we aren't really equipped to do that.” (http://en.wikipedia.org/wiki/Wikipedia:No_original_research). In the case of this article, it can be advocated, though, that it is quite easy for any of us to make a valid judgment as to whether it is true or not. The reader is sufficiently equipped to follow the demonstration presented according to basic logic.

2. Simply removing the article would leave us with a statement that is untrue, as it is demonstrated in the article. The statement is in the introduction to the Value Added Tax topic: “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(…)” (http://en.wikipedia.org/wiki/Value_added_tax)

Would it then be a solution to remove both the article and the untrue statement from the introduction?

Vincent44 00:12, 5 December 2006 (UTC)

Dear Vincent,

I will not come back to the discussion we have since one week on the French Wikipedia (http://fr.wikipedia.org/wiki/Discuter:Taxe_sur_la_valeur_ajout%C3%A9e), since this discussion is quite technical.

But with respect to what you have written above, I would like to issue some answers.

1. I am not sure at all that "the reader is sufficiently equipped to follow the demonstration presented according to basic logic". In fact, my experience (26 years as VAT Inspector and/or VAT consultant within a "big 4") shows that very few people really know how the VAT actually works. So, without knowing at least the "basic mechanisms" of VAT, and - among others - to which constrains the undertakings have to comply with (a.o. when to file VAT returns and what to put in these returns), it might be quite difficult for an unexeperienced reader to make a valid judgement.

Even worse, and frankly speaking, I am now wondering if you are "sufficiently equipped" to understand the "basic mechanisms" I have evoked above.

2. Removing your article would leave us with a statement that is widely accepted and agreed upon since more than 30 years. To the best of my knowledge, you're the very first person who says (I can not even write demonstates, as this is IMHO not the case) that this statement is wrong.

Although I must agree that "widely accepted and agreed upon" is not sufficient in itself for making a statement true, one should perhaps think that if this statement would be false, one would probably not have waited for you to demontrate it was false. This would have been done long time ago.

Removing both the article and the statement would not be a solution in my view because till now you are the only one to find the statement wrong, while there is a general agrement on the fact it is true.

May I suggest an alternative solution. Elaborate your theory more, write an article, get it published in a specialized tax magazine (for instance, The International VAT Monitor [3]) and see what the comment are (if you manage to get it published, which is not sure). And if you find enough people to agree on your theory, come back to Wikipedia.

But until this happens, I would agree on the statement of Pm67nz that this article should be removed or, at least, be shifted to this discussion page until accepted by the Wiki Community. And the same goes for the French article of course. --Lebob-BE 12:18, 5 December 2006 (UTC)

FWIW I agree that the section in question is original research. Tschild 17:16, 19 December 2006 (UTC)

I have removed the section in question todays as being original research. Tschild 19:47, 26 December 2006 (UTC)

[edit] Customs duty

"When goods are imported into the EU from other states, VAT is generally charged at the border, at the same time as customs duty."

Could this be explained/explanded? The link is to a redirect. Specifically: what is customs duty, if not another value-added tax, and isn't the point of the EU VAT area that such a tax only has to be paid once? Njál 18:35, 23 December 2006 (UTC)

VAT is a consumption tax that levied on each taxable transactions. These transactions usually result from agrements between two parties (i.e. sales of goods or services). But the imports of goods are also operations that fall within the scope of VAT (at least in the European Union VAT system. The VAT paid by business on its expenses is usually deductible from the VAT the same business must paid on its turnover.

On the other hand, the customs duties are paid in principe only once when the goods are imported within the territory of the European Union. These duties are not deductible as such and are thus part of the acquisition cost of the imported goods, while this is not the case for the VAT paid on an import of goods, since that VAT is normally fully deductible for the undertaking importing them.

Moreover, while almost all importations are liable to VAT, irrespective of the origin and nature of the goods, no customs duties maybe due at all on an import, based on the nature of the imported goods, their origin, or particular agreements that might exist between the European Union and another country (or a group of other countries). Such exemptions do normally no exist as far VAT is concerned. These exemptions may be definitive or temporary, depending upon on the agreement. Finally, there are also more global agreements or treaties (e.g. WTO) which regulates the customs duties, but not the VAT.--Lebob-BE 20:34, 23 December 2006 (UTC)

[edit] Sales tax against VAT once more

I have removed the changes made on 25 December 2006 by 64.76.139.200 as I felt they were not relevant within the context and, moreover, contained inaccuracies.

• Relevance: the subsection “comparison with sales tax” in fact compares how the VAT and the sales tax are levied. In fact, the tax rates applied have no incidence when one compares the mechanism of both tax systems. The tax rates applied in different systems and, by the way, in different countries, have only an incidence on the tax burden that the end consumers bear. The same goes for the subsection “Value added tax in the United States”. It is not the VAT system as such which increases “the costs of good and services significantly”, but the tax rates which are applied in countries with a VAT system. It should be clear that at equal price, goods liable to a 1% VAT rate will be cheaper than goods with a 8% sales tax.

• Accuracy: it has been stated that the VAT rates are in a range of 15-22%, which does not reflect the reality. As far the European Union is concerned, the normal VAT rates are between 15% (e.g. Luxembourg) and 25% (e.g. Denmark). However, the above statement does not take into account that most member States apply reduced rates to many items (among others food, clothes, drugs, etc). These reduce rates may be as low as 3%. Moreover some countries (e.g. the UK) have a zero rate for some basic supplies. --Lebob-BE 14:51, 25 December 2006 (UTC)

[edit] included in price tag

Would you know if VAT or GST in each country is already included in an item's price tag (e.g. something costs $1 and that $1 already includes VAT)? I suggest you add a column on this. --58.69.21.166 10:11, 30 January 2007 (UTC)

[edit] Rules on pricing within the EU

This section currently reads (partially): "Where most of the trade is business-to-business, prices do not have to include VAT if the buyer is a VAT registered European business.The seller will write on the invoice both the European VAT number of the buyer and mention of the relevant text as following: article 15 6th VAT Directive or number of the law in force in his country."

Article 15 of 6th VAT Directive can be found here among other places, and it reads:

Article 15

Exemption of exports and like transactions and international transport

Without prejudice to other Community provisions Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse: 1. the supply of goods dispatched or transported to a destination outside the territory of the country as defined in Article 3 by or on behalf of the vendor;

2. the supply of goods dispatched or transported to a destination outside the territory of the country as defined in Article 3 by or on behalf of a purchaser not established within the territory of the country, with the exception of goods transported by the purchaser himself for the equipping, fuelling and provisioning of pleasure boats and private aircraft or any other means of transport for private use;

3. the supply of services consisting of work on movable property acquired or imported for the purpose of undergoing such work in the territory of the country as defined in Article 3, and dispatched or transported out of the territory of that country by the person providing the services or by his customer who is not established within the territory of the country or on behalf of either of them;

4. the supply of goods for the fuelling and provisioning of vessels: (a) used for navigation on the high seas and carrying passengers for reward or used for the purpose of commercial, industrial or fishing activities;

(b) used for rescue or assistance at sea, or for inshore fishing, with the exception, for the latter, of ships' provisions;

(c) of war, as defined in subheading 89.01 A of the Common Customs Tariff, leaving the country and bound for foreign ports or anchorages.

The Member States may, however, restrict the scope of this exemption until the implementation of Community tax rules in this field;

5. the supply, modification, repair, maintenance, chartering and hiring of the sea-going vessels referred to in paragraph 4 (a) and (b) and the supply, hiring, repair and maintenance of equipment - including fishing equipment - incorporated or used therein;

6. the supply, modification, repair, maintenance, chartering and hiring of aircraft used by airlines operating for reward chiefly on international routes, and the supply, hiring, repair and maintenance of equipment incorporated or used therein;

7. the supply of goods for the fuelling and provisioning of aircraft referred to in paragraph 6;

8. the supply of services other than those referred to in paragraph 5, to meet the direct needs of the sea-going vessels referred to in that paragraph or of their cargoes;

9. the supply of services other than those referred to in paragraph 6, to meet the direct needs of aircraft referred to in that paragraph or of their cargoes;

10. supplies of goods and services: - under diplomatic and consular arrangements,

- to international organizations recognized as such by the public authorities of the host country, and to members of such organizations, within the limits and under the conditions laid down by the international conventions establishing the organizations or by headquarters agreements,

- effected within a Member State which is a party to the North Atlantic Treaty and intended either for the use of the forces of other States which are parties to that Treaty or of the civilian staff accompanying them, or for supplying their messes or canteens when such forces take part in the common defence effort.

This exemption shall be subject to conditions and limitations laid down by Member States until Community tax rules are adopted.

The exemption may be implemented by means of a refund of the tax;

11. supplies of gold to Central Banks;

12. goods supplied to approved bodies which export them as part of their humanitarian, charitable or teaching activities abroad. This exemption may be implemented by means of a refund of the tax;

13. the supply of services including transport and ancillary transactions but excluding the supply of services exempted under Article 13, when these are directly linked to the transit or the export of goods, or to the imports of goods benefiting from the provisions of Articles 14 (1) (b) and (c), and 16 (1);

14. services supplied by brokers and other intermediaries, acting in the name and for account of another person, where they form part of transactions specified in this Article, or of transactions carried out outside the territory of the country as defined in Article 3.

This exemption does not apply to travel agents who supply in the name and for account of the traveller services which are supplied in other Member States.

I don't think either the letter or the spirit of this article is in any way meant to convey that business-to-business trade doesn't need to incur VAT, regardless of whether one or both of the parties are VAT registered European businesses or not. Am I missing something? --Gutza ^{T T+} 15:29, 30 January 2007 (UTC)

As a matter of fact, I don’t know who has written that couple of sentences about on the rules on pricing within the EU. But, I can understand why you are wondering whether they are accurate based on the reference given with respect to the 6th EC Directive on VAT.

First of all, pricing rules have nothing to do with this provision of the Directive.

As a matter of fact, usually EU businesses supplying goods or services to another EU business will quote their price without VAT because the VAT will anyway in most cases be deductible for their customers.

With respect to supplies of goods made between two undertakings located within the territories of two different Member States, i.e. the so-called intra-Community supplies of goods, the question of pricing with or without VAT is in fact not relevant. Indeed, the supply (i.e. the sale) of the goods is exempted from VAT (i.e. zero rated) in the country of departure and is taxed (through another taxable transaction, i.e. an intra-Community acquisition of goods) in the Member State of arrival of the goods.

Since the contributor has spoken of quoting the VAT identification number and a reference to Article 15 of the 6th Directive, I believe he was thinking to the above situation.

Unfortunately, he has quoted the wrong reference to the Directive. In fact, the exemption sustained by the obligation to quote the VAT number of the customer (together with the obligation to supply an evidence that the goods have left the country) is an combined application of Articles 28c, A, a) and 22, (3), b), 4 dash, of the 6th EC directive. In fact, Article 15 provides the exemption rules applicable among others to exports of goods, to other transactions related to the international trade of goods and to transactions made within the framework of under diplomatic or consular arrangements.

I have tried to keep things simple. I am however not sure I managed to succeed in this. --Lebob-BE 20:13, 30 January 2007 (UTC)

Thank you, that is pertinent information. Ok, let's see if I understood this correctly (I'm corroborating with information from other sources).

As far as I could gather, VAT is simply irrelevant in B2B invoices between two entities in distinct Member States, since mechanisms are in place to collect VAT from the buying party regardless. However, assuming that's correct, it's still not clear whether VAT inclusion is desirable (recommended for), optional (utterly inconsequential), undesirable (recommended against) or forbidden in such a circumstance. --Gutza ^{T T+} 20:12, 31 January 2007 (UTC)

I'm not sure about the EU, but in the UK unless a price is specifically quoted as "VAT Exclusive" it is legally deemed to include VAT. This applies B2B and B2C.

And VAT is far from irrelevant in B2B invoices. A great many businesses are unable to recover VAT either in full or at all. Even for those that can recover VAT in full it can still represent a significant cash flow issue. Imagine purchasing a £3 million property with 17.5% VAT on it that will not be repaid by the tax authority for up to 4 months..... I advise many businesses that are need to avoid the VAT charge somehow because they cannot raise the additional finance.Theaardvark 23:23, 20 February 2007 (UTC)

Please note this is about B2B invoices between two entities in two distinct Member States. If both are in the same country -- be it France, UK or Romania, then of course VAT is not optional (except in some exceptional cases, of course). --Gutza ^{T T+} 15:59, 2 March 2007 (UTC)

[edit] VAT in India

I've made a first pass at cleaning this up. It has a general overview of the introduction of VAT in India, followed by an example of a particular state. Parts of it, particularly the last paragraph, are awash with unsourced data and POV statements. I'm tempted to hack out much of the last para and try to source the rest. Unless there's an Indian VAT expert lurking? --Winklethorpe 22:38, 16 March 2007 (UTC)