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.
And he's paying the VAT on all his costs.Just to expand, he's paying the VAT on all his inputs but not taking the credits. Unless he is collecting the VAT and not remitting, he would actually make more by charging the VAT and using his credits.
With a NRST this guy could be totally lost to the system.
Hate to tell you but under the VAT red tape there are more of them and they don't deal with businesses. They operate out of home and are generally barter, service and home manufacture/grown produce oriented.
OTOH, under the NRST the small guy can sell his services and home production to businesses without tax ramifications or redtape. That provides legal avenues to avoid the tax system at the production level, which is what is intended, and brings production to retail market nevertheless assuring a higher compliance rate for the NRST.
Under the NRST with less red tape, there are fewer blackmarket folks, and when they purchase that which they cannot manufacture, they pay the same NRST as everyone.
All the VAT does is ensure there are more folks treated like criminals and everyone pays a higher price for the costs induced by the high regulatory environment that all legal businesses must operate under with a VAT.