Value added tax
From Wikipedia, the free encyclopedia
Value added tax (VAT) is a type of sales tax. In some countries, including Australia, Canada, New Zealand, and Singapore, this tax is known as "goods and services tax" or GST; and in Japan it is known as "consumption tax". VAT is an indirect tax, in that the tax is collected from someone other than the person who actually bears the cost of the tax (namely the seller rather than the consumer). As VAT is intended as a tax on consumption, exports (which are, by definition, consumed abroad) are usually not subject to VAT or VAT is refunded.
VAT was invented by a French economist in 1954. Maurice Lauré, joint director of the French tax authority, the Direction générale des impôts, as taxe sur la valeur ajoutée (TVA in French) was first to introduce VAT with effect from 10 April 1954 for large businesses, and extended over time to all business sectors. In France, it is the most important source of state finance, accounting for approximately 45% of state revenues.
Personal end-consumers of products, consumers and services cannot recover VAT on purchases, but businesses are able to recover VAT on the materials and services that they buy to make further supplies or services directly or indirectly sold to end-users. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling. It has been criticized on the grounds that it is a regressive tax.
[edit] Comparison with a sales tax
VAT differs from a conventional sales tax in that VAT is levied on every business as a fraction of the price of each taxable sale they make, but they are in turn reimbursed VAT on their purchases, so the VAT is applied to the value added to the goods at each stage of production.
Sales taxes are normally only charged on final sales to consumers: because of reimbursement, VAT has the same overall economic effect on final prices. The main difference is the extra accounting required by those in the middle of the supply chain; this disadvantage of VAT is balanced by application of the same tax to each member of the production chain regardless of its position in it and the position of its customers, reducing the effort required to check and certify their status. When the VAT has few, if any exemptions such as with GST in New Zealand, payment of VAT is even simpler.
[edit] Example
Consider the manufacture and sale of any item, which in this case we will call a widget.
[edit] Without any sales tax
- A widget manufacturer spends $1 on raw materials and uses them to make a widget.
- The widget is sold wholesale to a widget retailer for $1.20, making a profit of $0.20.
- The widget retailer then sells the widget to a widget consumer for $1.50, making a profit of $0.30
[edit] With a U.S.-style sales tax
With a 10% sales tax:
- The manufacturer pays $1.00 for the raw materials, certifying it is not a final consumer.
- The manufacturer charges the retailer $1.20, checking that the retailer is not a consumer, leaving the same profit of $0.20.
- The retailer charges the consumer $1.65 ($1.50 + 10%) and pays the government $0.15, leaving the same profit of $0.30.
So the consumer has paid 10% ($0.15) extra, compared to the no taxation scheme, and the government has collected this amount in taxation. The retailers have not lost anything directly to the tax, but they do have the extra paperwork to do so that they correctly pass on to the government the sales tax they collect. Suppliers and manufacturers have the administrative burden of supplying correct certifications, and checking that their customers (retailers) aren't consumers.
[edit] With a VAT
With a 10% VAT:
- The manufacturer pays $1.10 ($1 + 10%) for the raw materials, and the seller of the raw materials pays the government $0.10.
- The manufacturer charges the retailer $1.32 ($1.20 + 10%) and pays the government $0.02 ($0.12 minus $0.10), leaving the same profit of $0.20.
- The retailer charges the consumer $1.65 ($1.50 + 10%) and pays the government $0.03 ($0.15 minus $0.12), leaving the same profit of $0.30.
So the consumer has paid 10% ($0.15) extra, compared to the no taxation scheme, and the government has collected this amount in taxation. The businesses have not lost anything directly to the tax, but they do have the extra paperwork to do so that they correctly pass on to the government the difference between what they collect in VAT (output VAT, an 11th of their income) and what they spend in VAT (input VAT, an 11th of their expenditure).
Note that in each case the VAT paid is equal to 10% of the profit, or 'value added'.
The advantage of the VAT system over the sales tax system is that businesses cannot hide consumption (such as wasted materials) by certifying it is not a consumer.
[edit] Limitations to Example & VAT
In the above example, we assumed that the same number of widgets were made and sold both before and after the introduction of the tax. This is not true in real life.
The fundamentals of supply and demand suggest that any tax raises the cost of transaction for someone, whether it is the seller or purchaser. In raising the cost, either the demand curve shifts leftward, or the supply curve shifts leftwards. The two are functionally equivalent. Consequently, the quantity of a good purchased, and/or the price for which it is sold, decrease.
This shift in supply and demand is not incorporated into the above example, for simplicity and because these effects are different for every type of good. The above example assumes the tax is non-distortionary.
A VAT, like as any other tax, distorts what would have happened without it. Because the price for someone rises, the quantity of goods traded decreases. Correspondingly, some people are worse off by more than the government is made better off by tax income . That is, more is lost due to supply and demand shifts than is gained in tax. This is known as a deadweight loss. The income lost by the economy is greater than the government's income; the tax is inefficient. The entire amount of the government's income (the tax revenue) may not be a deadweight drag, if the tax revenue is used for productive spending or has positive externalities - in other words, governments may do more than simply consume the tax income. While distortions occur, consumption taxes like VAT are often considered superior because they distort incentives to invest, save and work less than other types of taxation - in other words, a VAT discourages consumption rather than production.
In the above diagram,
Deadweight loss: the area of the triangle formed by the tax income box, the original supply curve, and the demand curve
Government's tax income: the grey area
Total consumer surplus after the shift: the green area
Total producer surplus after the shift: the yellow area
[edit] VAT criticisms
The "Value added tax" has been criticized as the burden of it relies on personal end-consumers of products and is therefore, as any sales tax based on the consumption of essentials, a regressive tax (the poor pay more, in comparison, than the rich). French President Jacques Chirac has often pleaded for a reduction of European VAT concerning catering, in order to win favour from this sector.
Revenues from a value added tax are frequently lower than expected because they are difficult and costly to administer and collect. In many countries, however, where collection of personal income taxes and corporate profit taxes has been historically weak, VAT collection has been more successful than other types of taxes. VAT has become more important in many jurisdictions as tariff levels have fallen worldwide due to trade liberalisation, as VAT has essentially replaced lost tariff revenues. Whether the costs and distortions of value added taxes are lower than the economic inefficiencies and enforcement issues (e.g. smuggling) from high import tariffs is debated, but theory suggests value added taxes are far more efficient.
Due to the fact that exports are generally zero-rated (and VAT refunded or offset against other taxes), this is often where VAT fraud occurs. In sectors or countries where VAT fraud is prevalent, attempts by authorities to control fraud may have unintended consequences, and raise costs for honest companies. This problem is also true of other types of taxation, however.
Certain industries (small-scale services, for example) tend to have more VAT avoidance, particularly where cash transactions predominate, and VAT may be criticised for encouraging this. From the perspective of government, however, VAT may be preferable because it captures at least some of the value-added. For example, a carpenter may offer to provide services for cash (i.e. without a receipt, and without VAT) to a homeowner, who usually cannot claim input VAT back. The homeowner will hence bear lower costs and the carpenter may be able to avoid other taxes (profit or payroll taxes). The government, however, may still receive VAT for various other inputs - lumber, paint, gasoline, tools, etc. While the total tax receipts may be lower compared to full compliance, it may not be lower than under other feasible taxation systems.
[edit] Criticism of "apportioned tax collection"
Template:QualityThe VAT so-called merit of ‘apportioned tax collection’ (ATC) –that is, the State collects a cumulative portion of the tax at each stage in the economic chain, and therefore need not wait until the sale to the consumer– must be examined more carefully, because it might constitute a conclusion drawn on a wrong basis. So much so that one could doubt of its reality.
One finds various wordings to describe ATC. One typical presentation goes along the following lines. Each business collects tax from its customers and pays tax to its suppliers, remitting the balance to the State. This balance, or net payable, is described as representing the tax levied on the value added by the business. The settlement of those net payables throughout the economy would therefore allow the State to effectively collect the tax at each stage in the economy.
The above reasoning appears to be based on the relation of any one business to the State (Of course it is extended to the whole economy, but a conclusion is already reached for one business). Yet, according to VAT regulation itself, the basic economic element that is subject to tax is the sale/purchase transaction between two economic entities.
Along this line, any transaction occurring wherever in the economy involves three entities (seller, buyer, and the State), and creates rights and obligations for each of them, all of the same amount, that is the VAT percentage on the transaction price. (For the seller: receivable from its customer and payable to the State. For the buyer: payable to its supplier and receivable from the State. For the State: receivable from the seller and payable to the buyer.) The subsequent settlement of these obligations shows a net cash flow of zero for all three entities (left aside possible timing differences). It seems therefore not possible to conclude to ATC on that basis. (Note: we do not consider here the sale to the final private end user, for which there is a net positive tax flow to the State.)
In other words, it seems that arriving at the ATC concept requires departing from the very definition of VAT (transaction based), to draw a conclusion from the perceived relation of any one business to the State, instead. Doing so might cause a problem since it seems to imply limiting the reasoning to the result of several transactions on one business (delivering further result for the State), while ignoring other results of the same transactions, i.e. the tax flows for the State linked to the partners in the transactions. And those tax flows cannot be left out, since they affect the State, whose point of view is the meaningful one concerning ATC. Expressed in more simple terms, it would be like conceiving a purchase being possible without the existence of a seller, and a sale needing no-one buying!
[edit] VAT in the European Union
A common VAT system is compulsory for member states of the European Union. The EU VAT system is imposed by a series of European Union directives, the most important of which is the Sixth VAT Directive (Directive 77/388/EC). Nevertheless, some member states have negotiated VAT exemption or variable rates for regions or territories. The Canary Islands, Ceuta and Melilla (Spain), Gibraltar (UK) and Åland Islands (Finland) are outside the scope of the EU system of VAT, while Madeira (Portugal) is allowed to levy variable rates.
Under the EU system of VAT, where a person carrying on an economic activity supplies goods and services to another person, and the value of the supplies passes financial limits, the supplier is required to register with the local taxation authorities and charge its customers, and account to the local taxation authority for, VAT (although the price may be inclusive of VAT, so VAT is included as part of the agreed price, or exclusive of VAT, so VAT is payable in addition to the agreed price).
VAT that is charged by a business and paid by its customers is known as output VAT (that is, VAT on its output supplies). VAT that is paid by a business to other businesses on the supplies that it receives is known as input VAT (that is, VAT on its input supplies). A business is generally able to recover input VAT to the extent that the input VAT is attributable to (that is, used to make) its taxable outputs. Input VAT is recovered by setting it against the output VAT for which the business is required to account to the government, or, if there is an excess, by claiming a repayment from the government.
Different rates of VAT apply in different EU member states. The minimum standard rate of VAT throughout the EU is 15%, although reduced rates of VAT, as low as 5%, are applied in various states on various sorts of supply (for example, domestic fuel and power in the UK). The maximum rate in the EU is 25%.
The Sixth VAT Directive requires certain goods and services to be exempt from VAT (for example, postal services, medical care, lending, insurance, betting), and certain other goods and services to be exempt from VAT but subject to the ability of an EU member state to opt to charge VAT on those supplies (such as land and certain financial services). Input VAT that is attributable to exempt supplies is not recoverable, although a business can increase its prices so the customer effectively bears the cost of the 'sticking' VAT (the effective rate will be lower than the headline rate and depend on the balance between previously taxed input and labour at the exempt stage).
Finally, some goods and services are "zero-rated". 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. In the UK, examples include most food, books, drugs, and certain kinds of transport. The zero-rate is not featured in the EU Sixth Directive as it was intended that the minimum VAT rate throughout Europe would be 5%. 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.
When goods are imported into the EU from other states, VAT is generally charged at the border, at the same time as customs duty. "Acquisition" VAT is payable when goods are acquired in one EU member state from another EU member state (this is done not at the border but through an accounting mechanism). EU businesses are often required to charge themselves VAT under the reverse charge mechanism where services are received from another member state or from outside of the EU.
Businesses can be required to register for VAT in EU member states, other than the one in which they are based, if they supply goods via mail order to those states, over a certain threshold. Businesses that are established in one member state but which receive supplies in another member state may be able to reclaim VAT charged in the second state under the provisions of the Eighth VAT Directive (Directive 79/1072/EC). A similar directive, the Thirteenth VAT Directive (Directive 86/560/EC), also allows businesses established outside the EU to recover VAT in certain circumstances.
Following changes introduced on 1 July, 2003 (under Directive 2002/38/EC), non-EU businesses providing digital electronic commerce and entertainment products and services to EU countries are also required to register with the tax authorities in the relevant EU member state, and to collect VAT on their sales at the appropriate rate, according to the location of the purchaser. Alternatively, under a special scheme, non-EU businesses may register and account for VAT on only one EU member state. This produces distortions as the rate of VAT is that of the member state of registration, not where the customer is located, and an alternative approach is therefore under negotiation, whereby VAT is charged at the rate of the member state where the purchaser is located.
The differences between different rates of VAT was often originally justified by certain products being "luxuries" and thus bearing high rates of VAT, whereas other items were deemed to be "essentials" and thus bearing lower rates of VAT. However, often high rates persisted long after the argument was no longer valid. For instance, France taxed cars as a luxury product (33%) up into the 1980s, when most of the French households owned one or more cars. Similarly, in the UK, clothing for children is "zero rated" whereas clothing for adults is subject to VAT at the standard rate of 17.5%.
[edit] Rules on pricing within the EU
- Where most of the trade is business-to-consumer, prices must include VAT.
- Where most of the trade is business-to-business, prices do not have to include VAT.
[edit] Value Added Tax in Denmark, Norway and Sweden (MOMS)
MOMS (Danish: Merværdi Omsætnings Skat, Norwegian: merverdiavgift (abriviated MVA), Swedish: mervärdesskatt, earlier mervärdesomsättningsskatt) is a Danish, Norwegian and Swedish sales tax. MOMS is the Danish, Norwegian and Swedish term for VAT. Like other countries' sales and VAT taxes, MOMS is a regressive indirect tax.
In Denmark, VAT is only applied at one level, and is not split into two levels as in other countries (e.g. Germany), where VAT is split into VAT for foodstuffs and VAT for nonfood. The current percentage in Denmark is 25%. That makes Denmark one of the countries with the highest value added tax, alongside Norway, Sweden and Hungary.
In Norway, VAT is split into three levels: 25% is the general VAT, 13% (Increases to 14% 2007-01-01) for foods and restaurant take-out (food eaten in a restaurant has 25%), 8% for person transport, movie tickets, and hotel stays. Most printed matter is still free of VAT.
In Sweden, VAT is split into three levels: 25% for most things, 12% for foods and 6% for printed matter.
MOMS replaced OMS (Danish "Omsætningsafgift", Swedish "omsättningsskatt") in 1967, which was a tax applied exclusively for retailers.
| Year | Tax level | OMS/MOMS
<tr><td>1962</td><td>9%</td><td>OMS</td></tr> <tr><td>1967</td><td>10%</td><td>MOMS</td></tr> <tr><td>1968</td><td>12,5%</td><td>MOMS</td></tr> <tr><td>1970</td><td>15%</td><td>MOMS</td></tr> <tr><td>1977</td><td>18%</td><td>MOMS</td></tr> <tr><td>1978</td><td>20.25%</td><td>MOMS</td></tr> <tr><td>1980</td><td>22%</td><td>MOMS</td></tr> <tr><td>1992</td><td>25%</td><td>MOMS</td></tr> |
[edit] Value Added Tax in India
In India, VAT replaced sales tax on 4 January 2005. Though some states did not opt for VAT (for political reasons), majority of the States embraced VAT, with Haryana being the first. The Empowered Committee, constituted by Government of India, provided the basic framework for uniform VAT laws in the states but due to the federal nature of Indian constitution, States do have a liberty to set their own valuations for the VAT levied in their own territory.
[edit] VAT - The A.P experience
The Andhra Pradesh Value Added Tax Act, 2005 came into force on 2005-4-1 and contains six Schedules. Schedule I contains goods generally exempted from tax. Schedule II deals with zero rated transactions like exports and Schedule III contains goods taxable at 1%, namely jewellery made from bullion and precious stones. Goods taxable at 4% are listed under Schdule IV. Majority of foodgrains and goods of national importance, like iron and steel are list under this head. Schedule V deals with Standard Rate Goods, taxable at 12.5%. All goods that are not listed elsewhere in the Act fall under this head. The VI Schedule is the bread and butter of all the State Govts. This Schedule contains goods taxed at special rates (more than 50%), like liquor and petroleum products. There are thus three rates of taxes in India, namely 1%; 4% and 12.5%.
The Act prescribes threshold limits for VAT registration - dealers with a taxable turnover of over Rs.40.00 lacs, in a tax period of 12 months, are mandatorily registered as VAT dealers. Dealers with a taxable turnover, in a tax period of 12 months, between Rs.5.00 to 40.00 lacs are registered as Turnover Tax (TOT) dealers. While the former category of dealers are eligible for input tax credit, the latter category of dealers are not eligible for input tax credit. A VAT dealer pays tax at the rate specifed in the Schedules. The sales of a TOT dealer are all taxable at 1%. A VAT dealer has to file a monthly return disclosing purchases and sales. A TOT dealer has to file a quarterly return disclosing only sale turnovers. While a VAT dealer can buy goods for business from anywhere in the country, a TOT dealer is barred from buying outside the State of A.P.
The A.P VAT Act appears to be the most liberal VAT law in India. It has simplified the registration procedures and provides for across the board input tax credit (with a few exceptions) for business transactions. A unique feature of registration in A.P is the facility of voluntary VAT registration and input tax credit for start-ups.
The A.P VAT Act also provides for transitional relief (TR) for goods on hand as of 2005-4-1. However, these goods ought to have been purchased from registered dealers between 2005-4-1 to 2005-3-31. This is a bold step compared to the 3 months TR provided by several developed countries.
The APVAT Act not only provides for tax refunds for exporters (refund of tax paid on inputs used in the manufacture of goods exported), it also provides for refund of tax in cases where the inputs are taxed at 12.5% and outputs are taxed at 4%.
The VAT Act in A.P is administered by a highly professional team of officers who were well trained by the PMT (Project Management Team) before the Act came into force. The Commercial Taxes Department (department to collect VAT and other taxes) has also put in place a software pacakage called VATIS (developed by TCS) with intra net on line connectivity to all the offices in the State. All the documents and forms received from the dealers are acknowledged and fed in VATIS to generate registration certificates and tax demand notices.
VAT, to be successful, relies on voluntary tax compliance. Since VAT believes in self assessments, dealers are required to maintain proper records, issue tax invoices, file correct tax returns etc. The opposite seems to be happening in India. Businesses are still run on traditional lines. Cash transactions are order of the day. The unorganised sector dominates the market. The hope of higher tax compliance and lesser evasion is still a far cry in A.P. This is reflected in the high % of return defaulters (14%), a high % of credit returns (35%) and a high % of nil returns (20%). That is, roughly 70% of VAT dealers are presently not paying any tax. Filing of credit returns is rampant among FMCG, Consumer Durables, Drugs and Medicines and Fertilizers. The margins are low in this sector (ranging between 2 to 5%). The value addition is not enough to yield revenue as of now. Credits offered by manufacturers compounds the problem. The question is - in a typical WalMart-like purchases and sales scenario, can there be more output tax than input tax? When purchases consistently exceed sales, can output tax exceed input tax? If a VAT dealer can balance his/her purchases and sales, can there be a net tax to the State? Is there a mathematical model or paradigm which can give value added tax and which can reduce the % of credit returns? There are no ready answers for these queries. The only remedy seems to be the restriction of input tax to the corresponding purchase value of goods put to sales. In fact a two tier system can be adopted to counter the credit returns - allow full input tax to manufacturers and restrict input tax to the purchase value of goods put to sale to traders. Restricting input tax to 4% in the case of inter state sales and in the case of products taxable at 12.5% seems to be another solution.
[edit] Value Added Tax in Mexico
Impuesto al Valor Agregado (IVA, " value-added tax" in Spanish) is a tax applied in Mexico and other countries of Latin America and Spain. In Chile it is called Impuesto a las Ventas y Servicios, in Spain Impuesto sobre el Valor Añadido and in Peru it is called Impuesto General a las Ventas or IGV.
Prior to the IVA, a similar tax called impuesto a las ventas ("sales tax" in the Spanish language) had been applied in Mexico. In September, 1966, the first attempt to apply the IVA took place when revenue experts declared that the IVA should be a modern equivalent of the sales tax as it occurred in France. At the convention of the Inter-American Center of Revenue Administrators in April and May, 1967, the Mexican representation declared that the application of a value-added tax would not be possible in Mexico at the time. In November, 1967, other experts declared that although this is one of the most equitable indirect taxes, its application in Mexico could not take place.
In response to these statements, direct sampling of members in the private sector took place as well as field trips to the European countries this tax was applied or it was soon to be applied. In 1969, the first attempt to substitute the mercantile-revenue tax for the value-added tax took place. On December 29, 1978 the Federal government published the official application of the tax beginning on January 1, 1980 in the Official Journal of the Federation.
[edit] Value Added Tax in the United States
In the United States, the state of Michigan uses a form of VAT known as the "Single Business Tax" (SBT) as its form of general business taxation. It is the only state in the US to use a VAT. When it was adopted in 1975, it replaced seven business taxes, including a corporate income tax. Under current Michigan law, the SBT is scheduled to be completely phased-out by 2009.
[edit] VAT Rates
[edit] EU countries
| Country | Rate | Abr. | Name | |
|---|---|---|---|---|
| Standard | Reduced | |||
| Image:Flag of Austria.svg Austria | 20% | 12% or 10% | MWSt | Mehrwertsteuer |
| Image:Flag of Belgium (civil).svg Belgium | 21% | 12% or 6% | BTW TVA MWSt | Belasting over de toegevoegde waarde Taxe sur la Valeur Ajoutée Mehrwertsteuer |
| Image:Flag of Cyprus.svg Cyprus | 15% | 5% | ΦΠΑ | Φόρος Προστιθεμένης Αξίας |
| Image:Flag of the Czech Republic (bordered).svg Czech Republic | 19% | 5% | DPH | Daň z přidané hodnoty |
| Image:Flag of Denmark.svg Denmark | 25% | moms | Merværdiafgift | |
| Image:Flag of Estonia.svg Estonia | 18% | 5% | km | käibemaks |
| Image:Flag of Finland (bordered).svg Finland | 22% | 17% or 8% | ALV Moms | Arvonlisävero Mervärdesskatt |
| Image:Flag of France.svg France | 19.6% | 5.5% or 2.1% | TVA | Taxe sur la Valeur Ajoutée |
| Image:Flag of Germany.svg Germany | 16% (2007: 19%) | 7% | MWSt/USt | Mehrwertsteuer/Umsatzsteuer |
| Image:Flag of Greece.svg Greece | 19% | 9% or 4.5% (reduced by 30% to 13%, 6% and 3% on islands) | ΦΠΑ | Φόρος Προστιθεμένης Αξίας |
| Image:Flag of Hungary.svg Hungary | 20% | 15% or 5% | ÁFA | általános forgalmi adó |
| Image:Flag of Ireland.svg Ireland | 21% | 13.5%, 4.8% or 0% | CBL VAT | Cáin Bhreisluacha Value Added Tax |
| Image:Flag of Italy.svg Italy | 20% | 10%, 6%, or 4% | IVA | Imposta sul Valore Aggiunto |
| Image:Flag of Latvia.svg Latvia | 18% | 5% | PVN | Pievienotās vērtības nodoklis |
| Image:Flag of Lithuania.svg Lithuania | 18% | 9% or 5% | PVM | Pridėtinės vertės mokestis |
| Image:Flag of Luxembourg.svg Luxembourg | 15% | 12%, 9%, 6%, or 3% | TVA | Taxe sur la Valeur Ajoutée |
| Image:Flag of Malta (bordered).svg Malta | 18% | 5% | TVM | Taxxa tal-Valur Miżjud |
| Image:Flag of the Netherlands.svg Netherlands | 19% | 6% | BTW | Belasting over de toegevoegde waarde |
| Image:Flag of Poland (bordered).svg Poland | 22% | 7%, 3% or 0% | PTU | Podatek od towarów i usług |
| Image:Flag of Portugal.svg Portugal | 21% | 12% or 5% | IVA | Imposto sobre o Valor Acrescentado |
| Image:Flag of Slovakia.svg Slovakia | 19% | DPH | Daň z pridanej hodnoty | |
| Image:Flag of Slovenia.svg Slovenia | 20% | 8.5% | DDV | Davek na dodano vrednost |
| Image:Flag of Spain.svg Spain | 16% | 7% or 4% | IVA | Impuesto sobre el valor añadido |
| Image:Flag of Sweden.svg Sweden | 25% | 12% or 6% | Moms | Mervärdesskatt |
| Image:Flag of the United Kingdom.svg United Kingdom | 17.5% | 5% or 0% | VAT | Value Added Tax |
[edit] Non-EU countries
Note 1: Some Canadian provinces collect 14% for harmonized sales tax, a combined federal/provincial VAT. In the rest, the federal GST is 6% and if the province charges sales tax it is separate and is not a VAT. No real "reduced rate" but rebates are generally available for new housing effectively reducing the tax to 4.5%
Note 2: These taxes do not apply in Hong Kong and Macau, which are financially independent as special administrative regions.
Note 3: In October 2006, the government announced that the reduced rate would be 7% from 1 March 2007. The reduced rate applies to most food, heating, hotel stays, printed matter, and (from 1 March 2007) food consumed in restaurants.
Note 4: VAT is not implemented in 2 of India's 28 states.
Note 5: The VAT in Israel is in the process of being gradually reduced. It was reduced from 18% to 17% on March 2004, to 16.5% on September 2005, and was set to its current rate on July 1, 2006. There are plans to further reduce it in the near future, but they depend on political changes in the Israeli parliament.
Note 6: In the 2005 Budget, the government announced that GST would be introduced in January 2007. Many details have not yet been confirmed but it has been stated that essential goods and small businesses would be exempted or zero rated. Rates have not yet been established.
Note 7: The President of the Philippines has the power to raise the tax to 12% after January 1, 2006. The tax was raised to 12% on February 1.
Note 8: On 13th of November 2006, Prime Minister Lee Hsien Loong announced that the GST would be increased to 7%. More details of the GST increase would be announced on 15th Feb 2007. [Source: http://www.channelnewsasia.com/stories/singaporelocalnews/view/241058/1/.html]
[edit] VAT registered
VAT registered means registered for VAT purposes, i.e. entered into an official VAT payers register of a country. Both natural persons and legal entities can be VAT registered. Countries that use VAT have established different thresholds for remuneration derived by natural persons/legal entities during a calendar year (or a different period) by exceeding which the VAT registration is compulsory. Natural persons/legal entities that are VAT registered are obliged to calculate VAT on certain goods/services that they supply and pay VAT into particular state budget. VAT registered persons/entities are entitled to VAT deduction under legislatory regulations of particular country.
[edit] See also
- List of tax rates around the world
- Gross price
- Jaffa Cake – Its non-VAT status was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit.
- Net price
- Revenue On-Line Service
- VAT 3
- Pretax
- Channel Islands VAT loophole – A loophole that enables companies to avoid paying VAT on low value products.
- Carousel VAT Fraud (Missing Trader Fraud)
[edit] References
- MOMS, Politikens Nudansk Leksikon 2002, ISBN 87-604-1578-9
[edit] External links
- What is VAT?: General overview
- EUROPE: Dont' you mind the tax burden? - The optimal direct/indirect tax mix: The Irish experiment
- Irish VAT law
- European VAT rates by service type
- MySME.de - German VAT and business tax
- VAT/GST sales tax rates around the world
- Consolidated version of the Sixth VAT Directive (398k pdf)
- HM Revenue & Customs
- UK VAT Threshold Rates
- Experts stumped by leap in trade gap, Guardian, September 10, 2005, discusses "missing trader fraud" and "carousel fraud".
- Indian VAT
- What is the Single Business Tax? (Michigan Department of Treasury)be:Падатак на дададзеную вартасьць
bs:PDV cs:Daň z přidané hodnoty da:Moms de:Umsatzsteuer es:IVA eo:Aldonvalora imposto fr:Taxe sur la valeur ajoutée id:Pajak Pertambahan Nilai is:Virðisaukaskattur it:Imposta sul valore aggiunto he:מס ערך מוסף lt:Pridėtinės vertės mokestis nl:Omzetbelasting ja:消費税 no:Merverdiavgift pl:Podatek od towarów i usług pt:IVA ro:Taxa pe valoarea adăugată ru:Налог на добавленную стоимость fi:Arvonlisävero sv:Mervärdesskatt th:ภาษีมูลค่าเพิ่ม tr:Katma Değer Vergisi zh:增值税
