If You Weren't Cynical Before, Fall Into a VAT

[Zathras]

Actually, in a pure VAT, you don't see it. A little is added at every stage of the process, from the manufacturer to the wholesaler to the retailer. The end consumer will not generally see all those taxes listed. They *might* see the tax added in the final stage of distribution (from the retailer to the consumer), but not the taxes built into the price before then.

In a national sales tax, on the other hand, you would see the tax specifically listed as a line item. Which is one reason I would prefer that to a VAT if we had to have one or the other. A VAT makes it easier to "hide" the taxes, much as with the gas tax where the price at the pump includes the tax which isn't separately listed.

Hmmm, seems the implementation of how it is 'reported' to the consumer will determine how well the transparency issue works.

 

[ziggy29]

Looking at some receipts from a shopping spree in France, I can clearly see the VAT amount listed and it looks a lot like the sales tax you would see on a receipt here in the US. The VAT amount listed is not the tax added in the final stage of distribution, but the total VAT paid on the product from inception.

That's good to know. I wonder if that's a fairly new thing, since I'd heard from some Europeans (and folks who visited Europe) that it's not necessarily always clearly listed.

Anyway, score a victory for transparency if that is in fact the case.

 

[FIREd]

That's good to know. I wonder if that's a fairly new thing, since I'd heard from some Europeans (and folks who visited Europe) that it's not necessarily always clearly listed.

Anyway, score a victory for transparency if that is in fact the case.

I am not sure if it's a new requirement or if it is retailer-dependent.

If the VAT is 20% and you buy something (say a watch) for $600 at a retailer you, as a consumer, will have paid $120 in VAT. It is just that easy to figure out.

If it were a 20% sales tax, the retailer would collect $120 and send it to the government. But with a VAT, in essence, the retailer only sends part of the $120 to the government and keeps the rest to offset the VAT he already paid on the merchandise he purchased: If the retailer paid the watch $400 from the manufacturer, he already paid $80 in VAT. Now he sells you the watch for $600 (VAT included), and has to collect $120 in VAT from you. He keeps $80 to offset the VAT he already paid on the watch and only sends $40 to the government.

From a consumer perspective however, there is seemingly no difference between a sales tax and a VAT. You still pay $120 in taxes on your purchase.

Note: I edited my post to make it clearer.

 

[Zero]

That's good to know. I wonder if that's a fairly new thing, since I'd heard from some Europeans (and folks who visited Europe) that it's not necessarily always clearly listed.

Anyway, score a victory for transparency if that is in fact the case.

I wonder if different countries might handle the VAT differently because in the UK, the receipt has only one line for: VAT 17%

The products are definitely already burdened with some form of hidden costs because an exact item in England costs about 1.5 times what it would in the US (same brand/model). That fact can easily be seen by doing an online comparison of a camera or computer.

So at least in England, a fair portion of the taxation is masked into the sell price.

 

[haha]

So at least in England, a fair portion of the taxation is masked into the sell price.

As far as I am concerned, this is a good thing. Many of us will be very aware of the size of this tax and how to minimize the bite- you know who you are.

Others will be less aware; finally they will be paying a little more tax. Dems don't mind taxing the little guy, they just don't want him to be too aware of the tax. The rest of us can count on Facebook, Twitter, and network TV to keep people totally ignorant of anything that might actually affect their lives

Ha

 

[FIREd]

Unlike sales taxes in the US, the VAT is always included (embedded) in the price of whatever you buy. Here is a typical French receipt:

I bought 3 items for 0.53 euros each (VAT included) for a total of 3*0.53 = 1.59 euros (VAT included)

That's how much I owed for the items including the VAT.

At the bottom of the receipt, you can see that the price of the items ex. VAT was 1.33 euros and I paid a VAT of 0.26 euros (19.6% of 1.33 euros) for a total of 1.59 euros.

 

[Zero]

As far as I am concerned, this is a good thing. Many of us will be very aware of the size of this tax and how to minimize the bite- you know who you are.

Others will be less aware; finally they will be paying a little more tax. Dems don't mind taxing the little guy, they just don't want him to be too aware of the tax. The rest of us can count on Facebook, Twitter, and network TV to keep people totally ignorant of anything that might actually affect their lives

Ha

Oh, agree 100%. Let the VAT begin. In England folks are blissfully unaware of the additional cost of taxation and I used to hear constantly about the extra cost of transporting things to their island home. Some actually believe that they have superior goods. It seems to make them feel better.

One thing I will guarantee is that VAT will never be implemented in the US across the board. Select groups will be exempt. A "Get Out of VAT Work" card. Aptly named the GOV at Work.

The hard worker will never be spared. That would be unfair.

 

[haha]

Unlike sales taxes in the US, the VAT is always included (embedded) in the price of whatever you buy. Here is a typical French receipt:

I bought 3 items for 0.53 euros each (VAT included) for a total of 3*0.53 = 1.59 euros (VAT included)

That's how much I owed for the items including the VAT.

At the bottom of the receipt, you can see that I paid a VAT of 19.6% or 0.26 euros. The price of the items ex. VAT was 1.33 euros and I paid 0.26 euros (19.6% of 1.33 euros) for a total of 1.59 euros.

Does this 19.6% represent the entire VAT burden, or is it only the retail part of a long chain of manufacturing and distribution taxes? And how about if the jouets chats are imported from VietNam, is there a VAT equalization tax so that the outsourced jouets chats are not afforded unfair advantage over the homegrown manufacturers. (Assuming that there were such in France!)

I see that you anwered most of my question in your post above. Only the import equalization remains...

Ha

 

[youbet]

It seems to make them feel better.

Their rulers are clever then...... Keeping the common folks feeling good about their lot is the key to maintaining power and your head!

 

[Zero]

Their rulers are clever then...... Keeping the common folks feeling good about their lot is the key to maintaining power and your head!

In France the VAT is smoothed over by letting them eat cake for free and in England, the crumpet is heavily subsidized. A crumpet with a bit of oleo and Vegamite seems enough to soothe the urge to question one's lot in life.

We'll get there, no worries. I feel like the VAT'd cow already.

 

[haha]

Their rulers are clever then...... Keeping the common folks feeling good about their lot is the key to maintaining power and your head!

I read an interesting poly sci book that maintained that the essence of wise and effective democratic government is obscurity. Since ordinary voters cannot concentrate well enough to understand the issues, and cannot stand back far enough to form intelligent opinions even if they did understand, the best thing for the nation is that the voters not become particularly bothered by what is going on.

I take no particular stand on this idea.

Ha

 

[Nodak]

Why even go with a cap and trade... that rewards current polluters... just do a carbon tax with NO exceptions... the market will work it out... and nobody gets rewared.. no funny accounting etc...

As for VAT... one of the things I forgot to mention about the 'other countries'... is that all the ones I have been to with VAT do NOT have 'state' sales taxes. The central government does all the VAT/Sales taxing... here, the VAT would be on TOP of all the states sales taxes... so we would be in a unique position.

Canada has both Provincial sales tax and VAT in at least some of the provinces. I am certain Manitoba has both and they add about 15% to the cost of goods.

 

[FIREd]

HaHa,

The 19.6% represents the entire VAT burden on this item, yes, not just the retail part of it. The entire VAT burden is born by the consumer, even if the VAT is collected in stages. Now, I am not sure how the VAT works when it comes to imports. I could ask my mom. As an accountant, she is very familiar with the subtleties of the VAT mechanisms. I am more familiar with the export process however, and I know that a foreign purchaser can ask for a VAT reimbursement. So I am pretty sure that you have to pay the VAT on whatever you import.

 

[haha]

HaHa,

The 19.6% represents the entire VAT burden on this item, yes, not just the retail part of it. The entire VAT burden is born by the consumer, even if the VAT is collected in stages. Now, I am not sure how the VAT works when it comes to imports. I could ask my mom. As an accountant, she is very familiar with the subtleties of the VAT mechanisms. I am more familiar with the export process however, and I know that a foreign purchaser can ask for a VAT reimbursement. So I am pretty sure that you have to pay the VAT on whatever you import.

Thanks FireDreamer.

Ha

 

[Bimmerbill]

Ouch 19.6% tax on sales. I may have to buy that new car and major appliances fast if they ever announce a VAT here in the US.

 

[happy2bretired]

Ouch 19.6% tax on sales. I may have to buy that new car and major appliances fast if they ever announce a VAT here in the US.

That's what I was thinking. I remember when there was an excise tax on luxury goods...anyway I think I do. Was that in the 60s or 70s when that tax was lifted or am I imagining that?

 

[Meadbh]

Canada has both Provincial sales tax and VAT in at least some of the provinces. I am certain Manitoba has both and they add about 15% to the cost of goods.

Sales taxes in Canada - Wikipedia, the free encyclopedia

Visible consumption taxes include GST (goods and services tax), currently 5%, and provincial sales tax (varies from province to province, currently 7% in Manitoba). Hence, a restaurant meal, or a purchase, will have 12% added to it in Manitoba. There is no PST on food or kids' clothing. Some provinces are reducing administration by using a Harmonized Sales Tax which is the sum of the GST and PST. Alberta (the richest province) has no provincial sales tax at all.

The history of GST in Canada is interesting. It was introduced in 1991 at 7% and was wildly unpopular. Over the ensuring decade, combined with careful financial management, it contributed to large budget surpluses that put Canada in a relatively good position to weather the recent recession. The current government, in an effort to gain votes, cut the GST to 6% in 2006 and then to 5%. Economists (and I) agree this was a bad decision. We could do with that extra 2% now when we are in a deficit spending position to stimulate the economy.

 

[Zathras]

Ouch 19.6% tax on sales. I may have to buy that new car and major appliances fast if they ever announce a VAT here in the US.

It depends. Is there an equal reduction in other taxes so your total cost is the same (or slightly more or less)?
We are getting well ahead of things, and I would agree with you is 20% is simply added ontop of what we are already paying.
However if there is a cut in our income taxes (which I doubt) then who knows.
I guess I am saying is it is too early to make judgements.

 

[Nodak]

Sales taxes in Canada - Wikipedia, the free encyclopedia

Visible consumption taxes include GST (goods and services tax), currently 5%, and provincial sales tax (varies from province to province, currently 7% in Manitoba). Hence, a restaurant meal, or a purchase, will have 12% added to it in Manitoba. There is no PST on food or kids' clothing. Some provinces are reducing administration by using a Harmonized Sales Tax which is the sum of the GST and PST. Alberta (the richest province) has no provincial sales tax at all.

The history of GST in Canada is interesting. It was introduced in 1991 at 7% and was wildly unpopular. Over the ensuring decade, combined with careful financial management, it contributed to large budget surpluses that put Canada in a relatively good position to weather the recent recession. The current government, in an effort to gain votes, cut the GST to 6% in 2006 and then to 5%. Economists (and I) agree this was a bad decision. We could do with that extra 2% now when we are in a deficit spending position to stimulate the economy.

Thanks for the correction.

 

[FUEGO]

Having a national VAT in the 12-20% doesn't seem too much more extreme than the 8-9% sales tax many of us pay in the US at the state and local level already. I'd just hate to see the VAT get added on top of the already high state/local sales taxes.

From our recent trip to Argentina and Uruguay, the VAT is actually easier to deal with on the consumer end versus our sales tax in the US. A $1 (or $1 peso) item actually costs $1, and not $1.08 after tax. No requirement to be able to figure out that if I don't want to spend more than $100 for something, I need to buy roughly a $92.50 item and then pay, say, 8% tax on it.

And all the VAT receipts I saw had the VAT specified in an exact amount, and a percentage (21% in Uruguay IIRC). So, for example, the receipt would say $100 pesos for the item, then $21 pesos for VAT. But the item you had picked up would be labeled $121 pesos on its price tag. I even recall in Uruguay that they had signs everywhere asking you to make sure your receipt specifies the VAT they are charging, and if not report them, since "it is all our duty to pay VAT".

 

[deserat]

Actually, in a pure VAT, you don't see it. A little is added at every stage of the process, from the manufacturer to the wholesaler to the retailer. The end consumer will not generally see all those taxes listed. They *might* see the tax added in the final stage of distribution (from the retailer to the consumer), but not the taxes built into the price before then.

In a national sales tax, on the other hand, you would see the tax specifically listed as a line item. Which is one reason I would prefer that to a VAT if we had to have one or the other. A VAT makes it easier to "hide" the taxes, much as with the gas tax where the price at the pump includes the tax which isn't separately listed.

Actually, in the US, the tax is added at the checkout register, so the price you see when you are shopping does *not* include the tax - here in Europe the tax is included in the price - you don't see the tax until you get the receipt where it is listed as a line item after the fact. Different process. And can affect behavior differently - I know I have to remember to ask what the sales tax is and then calculate what something will really cost me - with the VAT included, the price is much higher so is a dis-incentive to purchase...unless there is a need. Also, as for the tax being 'reimbursed' along the production line.....19% tax is a he!! of a lot to pay at the register for something - as I said before, I believe the costs are passed along the chain to the final owner....the purchaser.

As for the inevitability of a VAT - wow - I sure hope that's not true. Why can't we cut spending? Frankly, it's as my father used to say, "It depends on whose ox is being gored." Someone is going to get $crewed - I vote for incentivizing personal responsibility and not dependency. It will be better in the long run---

 

[haha]

As for the inevitability of a VAT - wow - I sure hope that's not true. Why can't we cut spending? Frankly, it's as my father used to say, "It depends on whose ox is being gored." Someone is going to get $crewed - I vote for incentivizing personal responsibility and not dependency. It will be better in the long run---

I would vote for that too. But when were we given that choice? Americans will never change their behavior or expectations as long as they are told "There will be no middle class tax increase to pay for all these goodies, only more tax on those evil rich guys " Right- many of these evil rich guys would be hard pressed to achieve a nice family lifestyle in any one of several large US cities.

America will change and people get reasonable when the dollar crashes and loses it's stature as reserve currency, and the IMF comes along to tell us what to do.

Can't expect mature behavior from people who don't have a clue what mature means.

Ha

 

[Zero]

BTW, by law in England a price is advertised with VAT included. You will only see the breakout at receipt time. Seems a double-edged method in that the government does not lobby the tax directly on the consumer but on the producer. But the producer is left to collect the VAT. Government = good guy, producer/retailer = bad guy.

The only places that were able to say L 130 + VAT, were shops that could reasonably say that their products were available to export markets. Tourist shops and many crystal, jewelery, etc. shops would display as "Price + VAT".

 

[Texas Proud]

BTW, by law in England a price is advertised with VAT included. You will only see the breakout at receipt time. Seems a double-edged method in that the government does not lobby the tax directly on the consumer but on the producer. But the producer is left to collect the VAT. Government = good guy, producer/retailer = bad guy.

The only places that were able to say L 130 + VAT, were shops that could reasonably say that their products were available to export markets. Tourist shops and many crystal, jewelery, etc. shops would display as "Price + VAT".

Does anybody know when they started to put the VAT on the receipt

I lived in London in late '99 to early '01. I bought a lot of stuff and not one receipt had a VAT on it... I went to other countries and they did not include VAT. The only time I knew what the VAT was was when I was in Switzerland and bought a watch. They asked if I was going to apply to get my VAT back. I said 'yes', not knowing what I needed to do. The receipt had the VAT. Maybe the EU made a change and forced them to put the VAT on the receipt.

PS... I did NOT get my VAT back as you had to spend more money than I did... so screwed on that one....

 

[Spanky]

I think it's inevitable that we have to raise taxes (AND cut spending), but I prefer my taxes to be obvious and transparent, not hidden in the price tag. People should know how much government is costing them.

We already know this - "an arm and a leg!"