Talk:Value added tax

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[edit] The importance of VAT

I concur with whoever wrote that VAT was invented to stop cheating and smuggling. Should it not also be written though, that the additional purpose of VAT is to provide government revenue which may effectively reduce (offset) personal income and company tax rates? —Preceding unsigned comment added by 58.110.38.10 (talk) 12:22, 25 November 2007 (UTC)

[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)

I'd agree that the directive to mention in the article is 2006/112/EC. PDF file, since that's a consolidated directive which at present has only been amended by 2006/138/EC PDF. (And do eur-lex links need to be to the LexUriServ.do URL to ensure permanence?) Yamazaki-kun (talk) 21:08, 13 December 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)
According to the book A Guide to the European VAT Directives [1] VAT was first proposed by Wilhelm von Seimens in 1919. Could this be Georg Wilhelm von Siemens? Theaardvark (talk) 15:23, 29 January 2008 (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: [2] 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".—Preceding unsigned comment 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?—Preceding unsigned comment added by 212.144.232.233 (talk • contribs) 15:05, 7 March 2006
Well, HMRC gives both names[3]:
'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 [4]) 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] Disputed

(See the section below, Rules on pricing within the EU; if clicking on that link doesn't lead to the respective section, it means that section has been archived either here or here.)


fixed now!

[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)

I agree, this section is totally wrong. I think who wrote it was referring to the reverse-charge mechanism (where the customer would account for VAT) - however the customer would ultimately still pay VAT: Dr Input VAT €X, Cr Output VAT €X; Dr Sales €Y Cr Output VAT €Y - The VAT payable is Output - Input = €X+Y - €X = €Y. Had the VAT been paid to the supplier, €X would be a normal expense and €Y-X would be the VAT due to Government (in total, €Y aswell).
The section is also wrong in suggesting that prices quoted between businesses are exclusive of VAT - ALL prices are deemed inclusive of VAT in ALL documents EXCEPT a tax invoice where if the tax element is missing the price is presumed to be exclusive of VAT.
It may also be that by B2B it was meant "purchases for resale", in which case it is correct since inter-community acquisitions for resale are exempt from VAT - from the Maltese law on VAT, chapter 406, 5th schedule, Part III "Exempt intra-community acquisitions" (p.64 English):

Intra-community acquisitions made for the purpose of a subsequent supply 1. The intra-community acquisition of goods by a taxable person not established in Malta and who is identified for value added tax purposes in another Member State if all the following conditions are fulfilled: (a) the acquisition of the goods is made for the purpose of a subsequent supply of those goods in Malta by that person; (b) the goods acquired have been directly transported from a Member State other than that where that person is identified for value added tax purposes to the person to whom the subsequent supply is made; (c) the person to whom the subsequent supply is made is a taxable person or a non-taxable legal person registered under article 10 or 12; (d) the person to whom the subsequent supply is made is liable for the payment of the tax on that supply.

└ VodkaJazz / talk ┐ 00:01, 8 June 2007 (UTC)

I'm the author of the original accuracy dispute note, and the person who started this section. I inserted the dispute notice while researching on how to issue invoices to my partner company in another EU country, after Romania joined the EU. My original note and comments were made before deciding how to approach this (I was still researching). After consulting various sources (reading and talking to other people), I ended up doing almost exactly what the disputed section says: I do indeed issue invoices without VAT, I do write the VAT registration numbers (both mine and the customer's) on the invoice, but I don't mention any law, article or directive explicitly on the invoice (presumably because it's obvious the supplier is Romanian and the customer isn't). But I don't expect writing that stuff on the invoice would get you in jail, so basically the article isn't wrong after all. However,

  1. I'm not an accountant, let alone a specialist in intra-EU laws;
  2. To this day, I was unable to understand why exactly I'm issuing invoices in that format -- it may well be that I'm actually wrong (I don't expect that's the case, but given that I'm not an expert, I can't really tell myself);
  3. I don't think there's any explanation throughout the article on how Member States (as in governments) balance their VAT at the end of the fiscal year (I didn't re-read all of the article before posting this, I might be wrong);
  4. While I can't still hold that I'm disputing the data in the section that I've marked as disputed (after all, I am doing what it says), I think the topic is sensitive enough for that notice to be left alone until we have some references and proper explanations in place -- people can literally be prosecuted if they get this wrong. And yes, I know Wikipedia does not offer legal advice, but I think we should follow common sense and label dubious legal advice explicitly when we see it. --Gutza T T+ 23:14, 7 July 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)

[edit] Cleanup

I don't understand the point of two banners. Nothing has been added to the talk to clarify the addition of either banner. Morphh (talk) 1:03, 18 April 2007 (UTC)

[edit] Is this insane?

Please take a look at this: http://www.townhall.com/columnists/PhyllisSchlafly/2007/04/30/easy_to_see_why_us_jobs_move_overseas

Does she just 100% misunderstand how VAT works, or is this an accurate view of the economics of the situation? The way I understand it:

Company A makes a widget in the USA, and sells it for $100. If they sell it in the USA, the retail price of the widget probably includes a state sales tax (X%). Thus, they charge (say X = 5) $105 and give $5 to the government. If they sell it in say Spain (VAT = 16%), they charge the Euro equivalent of $116, which includes a VAT of $16, which goes to the Spanish government.

Company B makes a widget in Spain, and sells it for $100. If they sell it in Spain, they get no VAT credit (because they created all the "value" themselves), and they charge the customer $116, of which $16 goes to the government. If they sell it in the USA, they don't pay a VAT (since it's an export), but they still pay state sales tax in whatever state the transaction takes place in, so they still charge $105 and still give $5 to the government.


So the way I see it, neither A nor B has a competitive advantage, since if they are both selling in the same market (country), the consumer pays the same amount for either product. The place where the final sale takes place determines what law sets the tax on the sale. The place where the item is manufactured only determines things like if/how much corporate income tax is paid and what labor laws apply. But the author of the column seems to think that the place the item is manufactured affects the amount of tax paid on it. Is that true? If so, how? 144.51.111.1 22:56, 30 April 2007 (UTC)

It is true. Most of the issue is related to the U.S. income tax systems. Income taxes are not border-adjustable; meaning the tax component embedded into products via taxes imposed on companies (including corporate taxes and payroll taxes) can not be removed when exported to a foreign country (see Effect of taxes and subsidies on price). Taxation systems such as a national sales tax or value added tax remove the tax component when goods are exported and apply the tax component on imports. Under an income tax, domestic products are at a disadvantage to foreign products (at home and abroad). Such a system greatly impacts the global competitiveness of a country. For example, the United States is the only one of 30 OECD countries with no border adjustment element in its tax system - Testimony Before the Subcommittee on Select Revenue Measures Due to this tax structure, it is estimated that U.S. goods are at a 17% competitive disadvantage, on average, to foreign producers. U.S. manufacturers and sellers can not compete successfully with foreign producers because of U.S. tax policy that has all but killed the 'Made in America' label. U.S. goods are essentially double taxed as exports (includes the U.S. income taxes and the foreign country VAT), while the foreign countries remove their VAT tax on export (exporting to the U.S. essentially tax free). So, U.S. domesitic goods are at a disadvantage as they contain income taxes, while the imports had their tax component removed. U.S. exports are at a disadvantage as they contain U.S. income taxes plus the applied VAT of the other country. A U.S. company pays taxes to the U.S. no matter where it is sold in the world plus that tax to the foreign country. VAT taxes are only applied to the country to which the good is sold, which has been shown to be a stronger economic model. Hope this makes helps answer your question... Morphh (talk) 13:25, 01 May 2007 (UTC)
In your example, the U.S. product probably contains about $20 of income taxes embedded into the price. It might only cost $80 to create the product in Spain with equal production cost. Spain ships the product here for $80 (since no VAT is applied) with the U.S. good domesiticly priced at $100. The U.S. good ships to Spain at $100 and applies the VAT for $116. The Spain product applies the $16 (probably less since it is a % but for easy math) for a cost of $96. U.S. State sales tax is irrelevant in these scenarios since it is applied to both domestic and import and removed on export. Morphh (talk) 13:37, 01 May 2007 (UTC)
This lady has absolutely not clue of the way VAT works. When one has so little knowledge on a given topic, one should at all costs refrain from writing on it. Now for people who have a little knowledge about VAT, she looks completely stupid. But that her problem. My problem is that when reading that rant, there could be people who could have a completely false idea on how VAT and other taxes work. Does she really think that the USA are the only country in the world where income taxes are paid by individuals and corportarions. This is the case in every European Union Member States. And sometimes, at taxation rates that make the USA look as a tax heaven. Moreover, contrary to what this lady seems to think, if US products imported into the European Union are liable to VAT, the same goes for the products produced within the European Union. And the so-called "VAT refund" on exports only exist in her mind. There is indeed a refund, but only to "clean" the cost of the exported goods from the input VAT incurred during the production process. Basically, this is just the same as the USA not charging sales tax on exported products. In no way has this a relation with income taxes. --Lebob-BE 14:24, 1 May 2007 (UTC)
While certainly other countries have income tax and corporate tax, the U.S. Fed relies pretty much solely on income based taxation and has one of the largest corporate tax rates. It is the only OECD country that has no border adjustment element (which the VAT allows). Sales taxes only apply at the state level and I agree they would have no effect or difference in international competition (though I don't see where she argues that). The VAT is a tax burden that is applied to foreign imports (U.S. exports). The U.S. does not apply such to imports and foreign countries remove their VAT on export. This is a tax base the U.S. makes up for with additional income taxes, which creates a competitive disadvantage in global trade. The U.S. needs to consider replacing income taxation with consumption taxation where needed to keep up with the new world of global trade. Morphh (talk) 14:56, 01 May 2007 (UTC)
I cannot fully agree with the above. While it is clear that no sale tax is levied in the USA on products imported from abroad, these will soon or late fall within the sales tax taxation scheme during their distribution process in the USA. This means that at the very end, the end consummer will have to bear the tax burden. The same will also happen for US products imported within Europe. Due to the VAT taxation mechanism in the European Union, the US products will not suffer a higher VAT charge than goods producted locally. Most of the time, the VAT paid on import within the EU is may be deducted by the importer from the VAT he must pay on his own sales. And this apply through the whole distribution chain till the end consummer who is in fact the one who bears the VAT burden. Both the VAT and the sales tax are basically consumption taxes that are levied in the country of effective consumption, irrespective of their origin (i.e. inland or abroad) and their cost is finally a charge for the end consummer. So, unless I would have missed something, I don't really see the point this lady is trying to make on the VAT. To the best of my knowledge, if you buy, let's a Mercedes car produced in Germany from a US car dealer, who will pay the local sale tax in the US (with a rate that may differ from one State (or even from on county) to another if my information about the US sales taxes is correct. The same will happen if, in Belgium I buy from a retailer a Ford or GM car produced in the States and imported into Europe. I will pay the Belgian VAT at the Belgian VAT rate to the retailer. But there will not be an additional VAT burden because the car has been imported from the USA. There might well be customs duties, but that's another story. And I guess that the USA also levy customs duties on some products imported from the European Union. In fact, the "VAT refund at export" (between brackets, because not fully techncally correct from a mere VAT point of view) is a border adjustement, but for VAT purposes only, not for corporate taxes. It doesn't make any difference in comparison to what happens in the USA for exports of goods.
Now one could of course discuss about the level of tax rates on the corporate income taxes. But in the competition with emerging countries, like China, I don't think this really matters. The main point of competition is the wages level. When the hourly wage for a Chinese blue collar is 1 USD or even less, competition becomes difficult to sustain irrespective of the corporate income taxes rates. --Lebob-BE 16:26, 1 May 2007 (UTC)
She is not discussing U.S. sales taxes which are applied at a state level. She is discussing federal taxes of the U.S. I understand that the VAT applied to U.S. imports will not suffer a higher VAT charge than goods producted locally. The problem is not with regard to the VAT. The U.S. needs a VAT or something similar (National Sales Tax). The problem is that the U.S. has a large tax burden built into the price of a good before it is exported (via its large income taxation) that it can not remove during export. A good sent to Europe includes all the U.S. embedded taxes. Then the VAT is applied to it just as it is to local goods. The issue is not the VAT, it is the U.S. not being able to remove the embedded tax component from its goods before export (like a VAT). On the reverse side, domestic U.S. goods include the tax cost, while imports had a portion of their tax cost removed at the border (VAT rebate). Unlike Europe, the U.S. federal government does not apply a sales tax or VAT tax on imports. So, they have less of a tax component then domestic goods. From one persective, foreign consumers are paying U.S. taxes (indirectly). On the other side, it creates a competitive disadvantage in global trade. Of course, other countries also have this problem with their embedded taxes, just on a smaller scale since they do allow some of their tax base to be removed for export and applied to import. Morphh (talk) 16:44, 01 May 2007 (UTC)
As far I know, I don't think that any European Union Member States allows a rebate on corporate income taxes on exported products. Moreover, I think such behaviour would be against the WTO principles and that the US Government would probably not remain without reaction should something like this happen. Of course, one can discuss about the level of inland taxation on both sides of the Atlantic Ocean. Within the European Union, there are quite huge disparities in the rates of corporate income tax rates from one country to another. So it's difficult to draw a general conclusion in that field since the situation actually need to be scrutinized on a country by country base. Finally, there are also other factors that need to be taken into account such a the exchange rates between the USD and the European currencies. For the time being, in that field, the US products are very competitive due to the relative weakness of the USD in comparison the the EURO. --Lebob-BE 17:43, 1 May 2007 (UTC)
Your correct that no one can allow a rebate on corporate income taxes or any income taxes included as part of production. The rebate is for the VAT. That is the point, all Federal U.S. taxes do not allow for any rebate on export and apply nothing on import. While other countries also have these taxes, they also have a VAT tax that allows this tax base to be border adjustable. This is beneficial to economic growth and competitiveness. It is a benefit of a consumption style tax like the VAT. The U.S. does not take advantage of such a system where other countries do and this gives them a advantage in regard to taxes applied to the price of their products. Part of the tax burden is adjustable at export / import, where in the U.S. it is not. Other factors are certainly at work in global trade competitiveness but the point is how competitive the U.S. would be if the tax system was not working against U.S. producers. Morphh (talk) 14:54, 02 May 2007 (UTC)

I'm the one that posted the original question. Jiminy, I had no idea there would be this kind of response! So it sounds like my understanding was largely correct, and can be distilled to mean that sales tax/VAT is almost totally disconnected from corporate income taxes, and the actual competitive (dis)advantage comes from disparate corporate income tax rates. The only problem is that the EU (for instance) tends to have high VAT and low corporate income tax, while the US tends to have high income taxes and low sales taxes (which do vary by state; a handful charge no sales tax at all). While I agree that this puts corporations at a disadvantage, the issue can be treated as isolated -- of course lower corporate income tax makes a market attractive to businesses, as any 3rd-grader could tell you after 10 minutes of explanation. Yes, the US needs to lower corporate income tax rates to attract businesses, but that doesn't mean we *have* to move to a national sales tax/VAT system -- any other source of revenue increase would offset the loss of corporate tax monies just the same. I personally think a "Fair Tax" style system would probably not be a bad idea -- if we totally replaced all corporate income taxes with a sales tax, we would go from an international trade disadvantage to stacking the deck in our favor -- but am open to other suggestions as well.

Now, if only somebody could explain all this to Ms. Schlafly.... 144.51.111.1 19:19, 16 May 2007 (UTC)

Criticism of "Criticism of VAT" In the article it states that VAT is costly to enforce and administer. This is incorrect. VAT is actually one of the cheapest for governments to collect. Indeed, that is why it so popular and why virtually all developed countries have one.

In the UK, for instance, VAT costs the UK government one penny in the pound to collect. Compare that to PAYE/NIC which costs 30-40p in the £ to collect, or to wealth taxes (e.g. IHT, CGT) which cost about 70p in the £ to collect.

Ya - we probably should not have discussed it that much as it was not related to the article content, which is what the talk pages are for. This would probably have been better on a blog group somewhere. I did want to mention though to keep in mind that this is not limited to corporate income taxes but all income tax costs that are built into the cost of production (to certainly include employer share of payroll). It has the same effect as built in health care costs that Ford and GM often discuss. The Tax Foundation has a ton of information on this tax challenge - both at the state and federal level. I like the FairTax plan - I think it would address many issues in U.S. tax policy. Morphh (talk) 1:10, 17 May 2007 (UTC)

Another article that discusses this Fair trade for U.S. business the aim of House bill

[edit] Problem

Uh, well here is my problem. If I buy stuff (120$ computer chip) from Amazon.com wich operates in the US (for my own service) and order it to be delivired via mail to southern Finland do I get it the same cost or is there some type of tax added?

84.250.110.93 14:14, 20 August 2007 (UTC)

[edit] VAT Receipt

I see no reference to exactly what a VAT receipt consists of and how it differs from an invoice. I think this is a vital inclusion of VAT. —The preceding unsigned comment was added by 82.152.138.226 (talk) 12:03, August 22, 2007 (UTC)

[edit] The section titled "Limitations to example and VAT" belongs in another article

This section is on taxes generally and has nothing to do with the VAT. It adds nothing to the VAT discussion. It should be located in an article focused more on the effect of taxes generally.70.56.162.141 06:28, 22 September 2007 (UTC)


[edit] VAT vs. income tax

The article doesn't explain the difference between a VAT and an income tax. Are they the same thing?

According to the examples given in this article "value-added" and "income" are both synonymous with profit (i.e., revenue minus total cost). What's missing is a discussion of the differences from country to country in the way that revenues and costs are claimed. For example, capital gains, labor, and materials costs may be treated differently in an income tax versus in a VAT. —Preceding unsigned comment added by 66.166.126.66 (talk) 23:17, 11 February 2008 (UTC)


[edit] Suggestion on a section

The following sentence in the early section of the article is very ambiguous :

"VAT proposes to replace sales tax which in most developing countries trying to shift to some variant of VAT, like India, is the 'only' major revenue source for the regional governments since low per capita income and unemployment render income tax inadequate as a revenue source."

What is the only major revenue source? Is it VAT or is it Sales Tax? The answer is obvious to an alert and informed reader. But we could make it a little more novice friendly. My suggestion is following:

"VAT proposes to replace sales tax. Presently, sales Tax is the 'only' major revenue source for the regional governments since low per capita income and unemployment render income tax inadequate as a revenue source in most developing countries like India, which are trying to shift to some variant of VAT."

Pranesh Bhargava

[edit] Article structure

Rather than starting with a comparison with a "conventional" sales tax (North American POV!) the article should be organized as follows, more or less: Describe what it is, Its history, Its application Advantages Disadvantages, and FINALLY a comparison with alternatives, such as the North American style sales tax. —Preceding unsigned comment added by 66.176.181.109 (talk) 02:08, 26 January 2008 (UTC)

[edit] Belgium reduced tax

Belgium has also a reduced tax of 0% for post stamps and (if I'm not mistaking) daily newspapers. 213.119.10.181 (talk) 07:04, 28 April 2008 (UTC)

Administrative circular nr. 82 of 15 December 1970 indeed provides a VAT exemption (which in practice is has the same effect as a zero rate) for sales of newspapers and magazines that are edited at least 50 times a year[5]. However, with respect to the Belgian VAT legislation this can technically not be regarded as a zero rate sINCE such a rate is not provided by the Belgian VAT Code or Royal Decree nr. 20 which states what rate is applicable to every kind of goods or services. --Lebob-BE (talk) 08:02, 28 April 2008 (UTC)

[edit] Separate EU VAT article

The EU VAT is pretty complicated and different from other VATs such as in their sourcing of services, which would justify a separate article on the EU VAT itself. In addition to transfering much of the content focusing on the EU VAT I could also add a lot of information on the EU VAT not found thus far in this article. Then we can make a reference to the EU VAT article as a main article link under the EU VAT section on this article. We could also make a link in the EU VAT article to guide the reader to the EU VAT area.EECavazos (talk) 04:27, 11 May 2008 (UTC)

I had the same idea for Wikipedia (fr). I would be glad to share ideas and views on how to do this and help you in doing this. In such a work the main pitfalls to avoid are IMHO:
  • being too technical in a stuff that is not necessarily easy to understand for non specialists
  • being too exhaustive which means that one could end up with writting a VAT handbook instead of an article on VAT.
Furthermore, the EU VAT should not only be limited to the provisions of Directive 2006/112/EC, but also include the 8th and 13th directives and Regulation 1798/2003 as well. --Lebob-BE (talk) 12:27, 13 May 2008 (UTC)
Yeah, I think so too. I think a good article on the EU VAT would cover the EU's perspective on the idea of a consumption tax as applied to a VAT on goods and services. For goods the article could cover intra-community acquisitions and domestic sales to highlight the nature of a multinational VAT including what rules to use for business to business transactions, business to consumer transactions, and business to non-taxable/VATable to consumer transactions. For services, the it could distinguish the sourcing rules of the 2nd directive used by much of Latin America and include the general rule with some of the exceptions like those applied to restaurants in Belgium and France. A good article would also include the history of the EU VAT including some of the political history to the present with Sarkozy running around and talking about the VAT rates. With all this said, it sounds like it could get pretty technical. I think though it can work out if the article focuses on the nature of the EU VAT as a multinational VAT taxing consumption on goods and services that may be supplied from different countries within the VAT.EECavazos (talk) 19:32, 13 May 2008 (UTC)
This article, the general VAT article, does a pretty decent job of explaining the VAT as a withholding tax in business to business transactions where the consumer is the one who ultimately pays the [consumption] tax. The EU VAT article could talk about how a VAT is applied by a group of nations working together.EECavazos (talk) 19:36, 13 May 2008 (UTC)
I don't have too much time right now, but I have a couple of thoughts on the above. The first one being that the EU VAT is not really what one could call a "multinational tax". In fact, within the EU, the only taxes that are really collected fo the account of the EU (as supranational instititution) are in fact the customs duties levied on import of goods into the EU. The VAT on the other hand remains a national tax that is collected by each individual Member State on its domestic consumption and for which an small part (representing 1.6% of the taxable amount if I remember well) is contributed to the budget of the European Union. This is the main reason why the VAT has been submitted to harmonisation and uniformisation rules appplicable to every EU Member State.
With respect to Sarkozy, this is not the first (and most probably not the last one) example of a politician announcing VAT rates reduction while forgetting (or maybe not) that for some goods or services he needs an unanimous agreement of the other Member States before making such a change. Such approach allows him (or other before and after him) to makes promisses and, afterwards, to put the fault on the EU: this is called "politic" :)
Finally do not forget that the second directive is no more applicable since 1978. In the Wikipedia (fr) article, I have put almost two years ago a small chapter on the history of the VAT in the EU. If you read French, have a look. --Lebob-BE (talk) 06:44, 14 May 2008 (UTC)

Here we go: European Union Value Added Tax. I am working through the article and right now I am focusing on the authority and scope of the EU VAT. It will take a while to fill in all the content.EECavazos (talk) 22:07, 15 May 2008 (UTC)

[edit] Merger of EU VAT section into EU VAT

I drafted a barebones article on the EU VAT. Then on this article under the EU VAT section I changed the merger banner to suggest a merger of the relative content into the EU VAT article.EECavazos (talk) 03:38, 16 May 2008 (UTC)

Done.EECavazos (talk) 21:29, 19 May 2008 (UTC)