I would agree that VAT (the credit invoice variety) compliance is easier to AUDIT, but that does not necessarily equate to easier to enforce. VAT enforcement would have vastly more entities to enforce than the FairTax making a cheater less likely to be audited, would of necessity be handled by a federal IRS type agency, would have to monitor every transaction made at every level of production, rather than just the retail point of sale, would still give the federal government justification to demand to know every entity's income and expenses, and would burden industry with a greater cost of compliance than the FairTax.
Provided the VAT plan had all of the other features of the FairTax (such as the rebate), I can't think of much where it would differ from the FairTax.
Can you suggest any advantages/disadvantages I have not thought of? I'm very interested in this since it seems odd to me that you seem so opposed to the FairTax, yet have expressed favor for a VAT.
I don't see a single advantage for the VAT except for the ability to cross reference one entity's audit, with everyone that that entity has done business with... which brings to my mind images of tax audits moving from company to company like a computer virus spreads from pc to pc. This would surely result in the cost of audits being imposed upon entities simply because they did business with someone else who is being audited.
Provided the VAT plan had all of the other features of the FairTax (such as the rebate), I can't think of much where it would differ from the FairTax.
Other than the overhead, administrative, and regulatory costs a VAT imposes on businesses at all levels and the cost of implementing an infra-structure capable of enforcing a credit voucher system that does not exist in the US today.
Refer:
A Value-Added Tax Contrasted
With a National Sales Tax
Cogressional Service Issue Brief #IB92069
Updated September 30, 2004
I don't see a single advantage for the VAT except for the ability to cross reference one entity's audit, with everyone that that entity has done business with... which brings to my mind images of tax audits moving from company to company like a computer virus spreads from pc to pc. This would surely result in the cost of audits being imposed upon entities simply because they did business with someone else who is being audited.
According to the descriptions in the literature, while such systems are envisioned in theory, their existence and effectiveness fall far short of the theory, for the precise reason you cite(indiced often by reporting errors in the system as often as not, as well as inability of actually tracking the multitude of business transactions that actually occur.
Another problem is the red-tape drives the little guy out of the formal economy to the underground cash economy where there is no monitor possible, nor tax collected. The little guy just says stuff it and goes his own way operating out of home manufacture & service type businesses free of the VAT systems.
See the hyperlinked papers on blackmarket & homeproduction in #1073
Can you suggest any advantages/disadvantages I have not thought of?
More on the secondary effects of VAT related red-tape in many areas of the EU that are not mentioned in the glowing reports selling the advantages of a VAT:
Underdevelopment Trap
Carillo & Pugno
University of Trento
Economics Department
January 2002