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.
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.
Home production and service business have few inputs. The participants use barter, cash and trade with each other for their inputs often to the total exclusion of the formal markets altogether. Once the single/selfemployed individual is driven out by red-tape that ends the participation in the tax system as far as business dealings go.
Under an NRST, if that small entrepeneur wants to avoid haggling with NRST and the state tax collection systems he has the option of selling produce and services to other businesses without the tax system intrusion. A factor totally missing under the VAT.
With the NRST the small busines can gain the foothold it needs to grow and enter full market particpation that is discouraged under VAT systems.
VAT in practical implementation simply does not fulfill the false promise of enforcibility. What it does do is create a intrusive environment that fosters government regulations and ever extending complexity in attempts ot "make fairer", "increase enforcibility", etc. that do no more that make sure that more participants evade the formal market all together.
That in a nut shell is what all these articles and reports are saying about economic conditions that ubiquitous VAT systems encourage.