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
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.And he's paying the VAT on all his costs. Another business wouldn't want to deal with him because they wouldn't get the credits on their inputs. With a NRST this guy could be totally lost to the system. This is a good example of why a VAT is more effective than a NRST. Thanks, AG.