This article is the current Taxation Collaboration of the Month.

Value added tax (VAT) is tax on exchanges. It is levied on the value added that results from each exchange. It differs from a sales tax because a sales tax is levied on the total value of the exchange. For this reason, a VAT is really neutral with respect to the number of passages that there are between the producer and the final consumer. A 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). To avoid double taxation on final consumption, exports (which are, by definition, consumed abroad) are usually not subject to VAT or VAT which led to such consequences is refunded. Image File history File links Crystal_Clear_app_Volume_Manager. ... Image File history File links Crystal_Clear_app_Volume_Manager. ... A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, tribes, secessionist movements or revolutionary movements). ... A sales tax is a state or locality imposed percentage tax on the selling or renting of certain property or services. ... The term indirect tax has more than one meaning. ...

The 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. Maurice Lauré (died 20 April 2001) is primarily known for creating the taxe sur la valeur ajoutée (TVA in French, otherwise known as value added tax (VAT) in English). ... April 10 is the 100th day of the year in the Gregorian calendar (101st in leap years). ... Year 1954 (MCMLIV) was a common year starting on Friday of the Gregorian calendar. ...

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. A regressive tax is a tax imposed so that the tax rate decreases as the amount to which the rate is applied increases. ...

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. A sales tax is a state or locality imposed percentage tax on the selling or renting of certain property or services. ...

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. Goods and Services Tax (a Value Added Tax)was introduced in New Zealand on the 1st of October 1986 at 10%. Only the end-consumer pays this tax (on the goods or service), and GST registered businesses generally are not charged GST upfront, or, if they are, are able to...

A general economic rule of thumb is that if sales taxes exceed 10%, people start engaging in widespread tax evading activity. (Buying over the Internet, pretending to be a business, buying at wholesale, buying products through an employer etc.) On the other hand, total VAT rates can rise above 10% without widespread evasion because of the novel collection mechanism.^{[citation needed]} However because of its particular mechanism of collection, VAT becomes quite easily the target of specific frauds like carousel fraud which can be very expensive in terms of loss of tax incomes for the States. A Missing Trader Fraud (or Carousel Fraud) is a type of deception practiced across different jurisdictions, exploiting the Value Added Tax systems between those jurisdictions. ...

Collection Mechanism

The standard way to implement a VAT is to say a business owes some percentage on the price of the good minus all taxes previously paid on the good. If VAT rates were 10%, an orange juice maker would pay 10% of the $5 per gallon price ($0.50) minus taxes previously paid by the orange farmer (maybe $0.20). In this example, the orange juice maker would have a $0.30 tax liability. Each business has a strong incentive for its suppliers to pay their taxes, allowing VAT rates to be higher with less tax evasion than a retail sales tax.

Example

Consider the manufacture and sale of any item, which in this case we will call a widget. It has been suggested that this article or section be merged with Placeholder name. ...

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

With a North America (Canada and 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.

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.

Limitations to Example and 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. The supply and demand model describes how prices vary as a result of a balance between product availability at each price (supply) and the desires of those with purchasing power at each price (demand). ... In economics, the demand curve can be defined as the graph depicting the relationship between the price of a certain commodity, and the amount of it that consumers are willing and able to purchase at that given price. ... The supply and demand model describes how prices vary as a result of a balance between product availability at each price (supply) and the desires of those with purchasing power at each price (demand). ...

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 most taxes, 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 most other types of taxation - in other words, a VAT discourages consumption rather than production. However they are still considered inferior to taxes like land value tax which neither cause deadweight losses nor distort incentives. In economics, a deadweight loss (also known as excess burden) is a permanent loss of well being to society that can occur when equilibrium for a good or service is not Pareto optimal, (that at least one individual could be made better off without others being made worse off). ... Land value taxation (LVT), or site value taxation, is the policy of raising state revenues by charging each landholder a portion of the value of a site or parcel of land that would exist even if that site had no improvements. ...

A Supply-Demand Analysis of a Taxed Market

In the above diagram, Image File history File links TaxWithTax. ...

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 Supply curve shift Consumer surplus or Consumers surplus (or in the plural Consumers surplus) is the economic gain accruing to a consumer (or consumers) when they engage in trade. ...

Total producer surplus after the shift: the yellow area This page deals with the various forms of economic surplus, including producer, consumer, government, and social/total surplus. ...

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. A sales tax is a state or locality imposed percentage tax on the selling or renting of certain property or services. ... A regressive tax is a tax imposed so that the tax rate decreases as the amount to which the rate is applied increases. ... Jacques René Chirac (born November 29, 1932 in Paris) is a French politician and the current President of the French Republic. ...

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) sold to the carpenter, who would be unable to reclaim the VAT on these inputs. While the total tax receipts may be lower compared to full compliance, it may not be lower than under other feasible taxation systems.

VAT systems

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. It has been suggested that this article or section be merged into European Union. ... A directive is a legislative act of the European Union which requires member states to achieve a particular result without dictating the means of achieving that result. ... The Canaries is the nickname of Norwich City FC. The Canaries is also the nickname of Hitchin Town F.C.. Capital Las Palmas de Gran Canaria and Santa Cruz de Tenerife Official language(s) Spanish Area  â€“ Total  â€“ % of Spain Ranked 13th  7,447 km²  1. ... Area  â€“ Total   28 km² Population  â€“ Total (2005)  â€“ Density  75,276  2688. ... Area  â€“ Total    20 km² (8 mi²) Population  â€“ Total (2005)  â€“ Density  65,488  3274. ... National motto: ? Official language Swedish Capital Mariehamn Governor Peter Lindbäck Premier Roger Nordlund Total Area  - Land  - Water 6,784 km² 1,527 km² 5,258 km² Population  - Total (2002)  - Density 26,257 17. ... Motto: Das ilhas, as mais belas e livres (Of all islands, the most beautiful and free) Anthem: A Portuguesa (national) Hino da Região Autónoma da Madeira (local) Capital (and largest city) Funchal Official languages Portuguese Government Autonomous region  - President Alberto João Jardim Independence    - Settled 1420   - Autonomy July...

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. The UK also exempts or lowers the rate on some products depending on situation; for example milk products are exempt from VAT, but if you go into a restaurant and drink a milk drink it is VAT-able. Some products such as feminine hygeine products and baby products (nappies etc) are charged at 5% VAT along with domestic fuel.

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. Border stone at Passo San Giacomo between Val Formazza in Italy and Val Bedretto in Switzerland Borders define geographic boundaries of political entities or legal jurisdictions, such as governments, states or subnational administrative divisions. ... Customs is the plural of custom, a common practice among a group of people. ...

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. July 1 is the 182nd day of the year (183rd in leap years) in the Gregorian Calendar, with 183 days remaining. ... 2003 (MMIII) was a common year starting on Wednesday of the Gregorian calendar. ... It has been suggested that this article or section be merged with electronic business. ...

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%.

Rules on pricing within the EU

The factual accuracy of this section is disputed. Please see the relevant discussion on the talk page

• 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 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.

Image File history File links Circle-question-red. ...

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. A sales tax is a state or locality imposed percentage tax on the selling or renting of certain property or services. ... Value added tax (VAT) is tax on exchanges. ... A regressive tax is a tax imposed so that the tax rate decreases as the amount to which the rate is applied increases. ... The term indirect tax has more than one meaning. ...

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 and Sweden.

In Norway, VAT is split into three levels: 25% is the general VAT, 14% (formerly 13%, up on January 1, 2007) for foods and restaurant take-out (food eaten in a restaurant has 25%), 8% for person transport, movie tickets, and hotel stays. Most printed matters are still free of VAT. January 1 is the first day of the calendar year in both the Julian and Gregorian calendars. ... 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the Anno Domini (common) era. ...

In Sweden, VAT is split into three levels: 25% for most goods and services including restaurants bills, 12% for foods and hotel stays (but breakfast at 25%) and 6% for printed matter, cultural services,and transport of private persons. Some services are not taxable for example education of children and adults if public utility, but education is taxable at 25% in case of courses for adults at a private school.

MOMS replaced OMS (Danish "Omsætningsafgift", Swedish "omsättningsskatt") in 1967, which was a tax applied exclusively for retailers. 1967 (MCMLXVII) was a common year starting on Sunday of the Gregorian calendar (the link is to a full 1967 calendar). ...

1962 (MCMLXII) was a common year starting on Monday (the link is to a full 1962 calendar). ... 1967 (MCMLXVII) was a common year starting on Sunday of the Gregorian calendar (the link is to a full 1967 calendar). ... 1968 (MCMLXVIII) was a leap year starting on Monday. ... 1970 (MCMLXX) was a common year starting on Thursday (the link is to a full 1970 calendar). ... For the album by Ash, see 1977 (album). ... 1978 (MCMLXXVIII) was a common year starting on Sunday. ... 1980 (MCMLXXX) was a leap year starting on Tuesday. ... 1992 (MCMXCII) was a leap year starting on Wednesday. ...

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. A sales tax is a state or locality imposed percentage tax on the selling or renting of certain property or services. ... January 4 is the 4th day of the year in the Gregorian calendar. ... 2005 (MMV) was a common year starting on Saturday of the Gregorian calendar. ... This article or section does not cite its references or sources. ... The Government of India (Hindi: Bharat Sarkar), officially referred to as the Union Government, and commonly as Central Government, was established by the Constitution of India, and is the governing authority of a federal union of 28 states and 7 union territories, collectively called the Republic of India. ...

The A.P experience

The Andhra Pradesh Value Added Tax Act, 2005 came into force on 1 April 2005 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.

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. Value added tax (VAT) is a sales tax levied on the sale of goods and services. ... A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, tribes, secessionist movements or revolutionary movements). ... Latin America consists of the countries of South America and some of North America (including Central America and some the islands of the Caribbean) whose inhabitants mostly speak Romance languages, although Native American languages are also spoken. ...

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. This article is about the international language known as Spanish. ...

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 (Diario Oficial de la Federación). This article is 150 kilobytes or more in size. ... For the Stargate SG-1 episode, see 1969 (Stargate SG-1). ... December 29 is the 363rd day of the year (364th in leap years) in the Gregorian Calendar, with 2 days remaining. ... 1978 (MCMLXXVIII) was a common year starting on Sunday. ... January 1 is the first day of the calendar year in both the Julian and Gregorian calendars. ... 1980 (MCMLXXX) was a leap year starting on Tuesday. ... The Official Journal of the Federation (Spanish: Diario Oficial de la Federación, DOF) is the journal published by the government of Mexico. ...

New Zealand

Goods and Services Tax (GST) is a Value Added Tax introduced in New Zealand in 1986. It is notable for exempting few items from the tax.

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. On August 9, 2006, the Michigan Legislature approved voter-initiated legislation to repeal the Single Business Tax. The repeal will be effective after December 31, 2007. [1] Official language(s) None (English, de-facto) Capital Lansing Largest city Detroit Area  Ranked 11th  - Total 97,990 sq mi (253,793 km²)  - Width 239 miles (385 km)  - Length 491 miles (790 km)  - % water 41. ... Corporate tax refers to direct taxes charged by various jurisdictions on the profits made by companies or associations. ...

Most states have sales tax charged to the end buyer only. Sales tax rates are anywhere from 0%-8.8% depending upon the state and the municipality. The unit price tags and advertised prices on items usually do not include sales tax yet and will only be computed at the cash register when the customer pays for them. Generally no sales tax is charged for most services. This is a big difference between countries that levy a VAT tax and Sales Tax levied in the United States.

Tax Rates

EU countries

Country	Rate		Abr.	Name
	Standard	Reduced
Austria	20%	12% or 10%	USt.	Umsatzsteuer
Belgium	21%	12% or 6%	BTW TVA MWSt	Belasting over de toegevoegde waarde Taxe sur la Valeur Ajoutée Mehrwertsteuer
Bulgaria	20%	7%	DDS = ДДС	Данък Добавена Стойност
Cyprus	15%	5%	ΦΠΑ	Φόρος Προστιθεμένης Αξίας
Czech Republic	19%	5%	DPH	Daň z přidané hodnoty
Denmark	25%		moms	Merværdiafgift
Estonia	18%	5%	km	käibemaks
Finland	22%	17% or 8%	ALV Moms	Arvonlisävero Mervärdesskatt
France	19.6%	5.5% or 2.1%	TVA	Taxe sur la Valeur Ajoutée
Germany	19%	7%	MwSt./USt.	Mehrwertsteuer/Umsatzsteuer
Greece	19%	9% or 4.5% (reduced by 30% to 13%, 6% and 3% on islands)	ΦΠΑ	Φόρος Προστιθέμενης Αξίας
Hungary	20%	5%	ÁFA	általános forgalmi adó
Ireland	21%	13.5%, 4.8% or 0%	CBL VAT	Cáin Bhreisluacha Value Added Tax
Italy	20%	10%, 6%, or 4%	IVA	Imposta sul Valore Aggiunto
Latvia	18%	5%	PVN	Pievienotās vērtības nodoklis
Lithuania	18%	9% or 5%	PVM	Pridėtinės vertės mokestis
Luxembourg	15%	12%, 9%, 6%, or 3%	TVA	Taxe sur la Valeur Ajoutée
Malta	18%	5%	TVM	Taxxa tal-Valur Miżjud
Netherlands	19%	6%	BTW	Belasting over de toegevoegde waarde
Poland	22%	7%, 3% or 0%	PTU/VAT	Podatek od towarów i usług
Portugal	21%	12% or 5%	IVA	Imposto sobre o Valor Acrescentado
Romania	19%	9%	TVA	Taxa pe valoarea adăugată
Slovakia	19%		DPH	Daň z pridanej hodnoty
Slovenia	20%	8.5%	DDV	Davek na dodano vrednost
Spain	16%	7% or 4%	IVA	Impuesto sobre el valor añadido
Sweden	25%	12% or 6%	Moms	Mervärdesskatt
United Kingdom	17.5%	5% or 0%	VAT	Value Added Tax

Image File history File links Flag_of_Austria. ... Image File history File links Flag_of_Belgium_(civil). ... Image File history File links Flag_of_Bulgaria_(bordered). ... Image File history File links Flag_of_Cyprus_(bordered). ... Image File history File links Flag_of_the_Czech_Republic_(bordered). ... Image File history File links Flag_of_Denmark. ... Image File history File links Flag_of_Estonia_(bordered). ... Image File history File links Flag_of_Finland_(bordered). ... Image File history File links Flag_of_France. ... Image File history File links Flag_of_Germany. ... Image File history File links Flag_of_Greece. ... Image File history File links Flag_of_Hungary. ... Image File history File links Flag_of_Ireland_(bordered). ... Image File history File links Flag_of_Italy. ... Image File history File links Flag_of_Latvia. ... Image File history File links Flag_of_Lithuania. ... Image File history File links Flag_of_Luxembourg. ... Image File history File links Flag_of_Malta_(bordered). ... Image File history File links Flag_of_the_Netherlands. ... Image File history File links Flag_of_Poland_corrected_(bordered). ... Image File history File links Flag_of_Portugal. ... Image File history File links Flag_of_Romania. ... Image File history File links Flag_of_Slovakia_(bordered). ... Image File history File links Flag_of_Slovenia_(bordered). ... Image File history File links Flag_of_Spain. ... Image File history File links Flag_of_Sweden. ... Image File history File links Flag_of_the_United_Kingdom. ...

Non-EU countries

Country	Rate		Local name
	Standard	Reduced
Argentina	21%	10.5% or 0%	IVA = Impuesto al Valor Agregado
Australia	10%	0%	GST = Goods and Services Tax
Bosnia and Herzegovina	17%		PDV = porez na dodatu vrijednost
Canada	6% or 14%1	4.5%	GST = Goods and Services Tax, TPS = Taxe sur les produits et services
Chile	19%		IVA = Impuesto al Valor Agregado
People's Republic of China2	17%	6% or 3%	增值税
Croatia	22%	0%	PDV = Porez na dodanu vrijednost
Dominican Republic	6%	12% or 0%
Ecuador	12%		IVA = Impuesto al Valor Agregado
El Salvador	13%		IVA = Impuesto al Valor Agregado
Guyana	16%	14%
Iceland	24.5%	14%3	VSK = Virðisaukaskattur
India4	12.5%	4%, 1%, or 0%
Israel	15.5%5		Ma'am = מס ערך מוסף
Japan	5%		Consumption tax = 消費税
Jersey9	3%	0%	GST = Goods and Sales Tax
Kazakhstan	14%
Lebanon	10%
Moldova	20%	5%	TVA = Taxa pe Valoarea Adăugată
Republic of Macedonia	18%	5%	ДДВ = Данок на Додадена Вредност
Malaysia6	5%
Mexico	15%	0%	IVA = Impuesto al Valor Agregado
New Zealand	12.5%		GST = Goods and Services Tax
Norway	25%	14% or 8%	MVA = Merverdiavgift (informally moms)
Paraguay	10%	5%	IVA = Impuesto al Valor Agregado
Peru	19%		IGV = Impuesto General a la Ventas
Philippines	12%7		RVAT = RVAT or Reformed Value Added Tax, locally known as Karagdagang Buwis
Russia	18%	10% or 0%	НДС = Налог на добавленную стоимость
Serbia	18%	8% or 0%	PDV = Porez na dodatu vrednost
Singapore	5% 8		GST = Goods and Services Tax
South Africa	14%	0%	VAT = Valued Added Tax
South Korea	10%		부가세 = 부가가치세
Sri Lanka	15%
Switzerland	7.6%	3.6% or 2.4%	MWST = Mehrwertsteuer, TVA = Taxe sur la valeur ajoutée, IVA = Imposta sul valore aggiunto, VAT = Value Added Tax
Thailand	7%
Trinidad and Tobago	15%
Turkey	18%	8% or 1%	KDV= Katma değer vergisi
Ukraine	20%	0%	ПДВ= Податок на додану вартість
Venezuela	11%	8%	IVA = Impuesto al Valor Agregado

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. vat can be a type of barrel used for storage. ...

See also

• List of tax rates around the world
• Jaffa Cake – Its non-VAT status was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit.
• 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)
• Progressive tax
• Regressive tax
• Income tax
• Flat tax
• Sales tax
• Land value tax

Comparison of tax rates around the world is a difficult and somewhat subjective enterprise. ... A Jaffa Cake A Jaffa Cake is a popular type of snack sold under a number of different brands, the market leader being McVities (United Biscuits). ... This article or section does not cite its references or sources. ... This article or section does not cite its references or sources. ... The Revenue On-Line Service or ROS, is a pioneer in European internet applications, and it is run by the Irish Revenue Commissioners. ... A VAT 3 is a form filed in every two months by companies, business and Sole Traders in the Republic of Ireland who are registered for Value Added Tax. ... Pretax Group is a big Finnish financial administration company which headquarters are located in Helsinki. ... Value Added Tax-free Exports from the Channel Islands are exports of goods from the Channel Islands on which Value added tax (VAT) is not levied. ... A Missing Trader Fraud (or Carousel Fraud) is a type of deception practiced across different jurisdictions, exploiting the Value Added Tax systems between those jurisdictions. ... A progressive tax is a tax imposed so that the tax rate increases as the amount to which the rate is applied increases. ... A regressive tax is a tax imposed so that the tax rate decreases as the amount to which the rate is applied increases. ... An income tax is a tax levied on the financial income of persons, corporations, or other legal entities. ... A flat tax, also called a proportional tax, is a system that taxes all entities in a class (typically either citizens or corporations) at the same rate (as a proportion on income), as opposed to a graduated, or progressive, scheme. ... A sales tax is a state or locality imposed percentage tax on the selling or renting of certain property or services. ... Land value taxation (LVT), or site value taxation, is the policy of raising state revenues by charging each landholder a portion of the value of a site or parcel of land that would exist even if that site had no improvements. ...

References

• MOMS, Politikens Nudansk Leksikon 2002, ISBN 87-604-1578-9

External links

• What is VAT?: General overview
• An introduction to VAT
• Irish VAT law
• European VAT rates by service type
• German VAT
• VAT/GST sales tax rates around the world
• Consolidated version of the Sixth VAT Directive (398k pdf)
• HM Revenue & Customs
• UK VAT Threshold Rates
• Indian VAT
• What is the Single Business Tax? (Michigan Department of Treasury)