There is also plenty of evidence from every single continent on what a sales tax becomes when its rate gets too high: A VAT!
There is also plenty of evidence from every single continent on what a sales tax becomes when its rate gets too high: A VAT!
Not all sales taxes are equal my friend. The "sales tax" you refer to is the European business turnover tax that was replaced VATs. A sales tax on business purchases as opposed to retail only tax, as such taxes cascade throughout an economy causing extreme economic problems.
The dominate reason many other countries have gone to a VAT is it is a requirement for European Union membership in order to create a uniform tax sytem, a basis not related to "retail sales tax" evasion.
You should note that retail sales taxes were expressly not replaced by the VAT in the EU where VAT became the tax system of choice:
| http://europa.eu.int/eur-lex/en/consleg/pdf/1967/en_1967L0227_do_001.pdf FIRST COUNCIL DIRECTIVE Having regard to the Treaty establishing the European Economic Community,and in particular Articles99 and 100 thereof; Having regard to the proposal from the Commission; Whereas the main objective of the Treaty is to establish,within the framework of an economic union,a common market within which there is healthy competition and whose characteristics are similar to those of a domestic market; Whereas the attainment of this objective presupposes the prior application in Member States of legislation concerning turnover taxes such as will not distort conditions of competition or hinder the free movement of goods and services within the common market; Whereas the legislation at present in force does not meet these requirements; Whereas it is therefore in the interest of the commom market to achieve such harmonisation of legislation concerning turnover taxes as will eliminate, as far as possible, factors which may distort conditions of competition, whether at national or Community level,and make it possible subsequently to achieve the aim of abolishing the imposition of tax on importation and the remission of tax on exportation in trade between Member States; Whereas, in the light of the studies made, it has become clear that such harmonisation must result in the abolition of cumulative multi-stage taxes and in the adoption by all Member States of a common system of value added tax; Whereas a system of value added tax achieves the highest degree of simplicity and of neutrality when the tax is levied in as general a manner as possible and when its scope covers all stages of production and distribution and the provision of services;whereas it is therefore in the interest of the common market and of Member States to adopt a common system which shall also apply to the retail trade; Whereas,however,the application of that tax to retail trade might in some Member States meet with practical and political difficulties; whereas,therefore,Member States should be permitted,subject to prior consultation,to apply the commom system only up to and including the wholesale trade stage,and to apply,as appropriate,a separate complementary tax at the retail trade stage,or at the preceding stage; Whereas it is necessary to proceed by stages,since the harmonisation of turnover taxes will lead in Member States to substantial alterations in tax structure and will have appreciable consequences in the budgetary,economic and social fields; *** SNIP *** |
In fact, the original reason for a VAT was due to the cascading effect of transaction/turnover taxes on all business operations (a VAT without purchase credits) that created devastatingly high tax burdens on business and economies. The creation of the VAT had little if anything to due with evasion rates of retail sales taxes.
http://www.uq.edu.au/economics/johnquiggin/news/GST9806.html
| "The VAT was introduced in France in 1954, to replace a system which relied a highly distortionary turnover tax on sales to supplement a rather ineffectual income tax system. The problem with a turnover tax is the 'cascade' effect arising from the fact that goods are taxed every time they change hands. The effective rate of tax on a good therefore depends on the length of the marketing chain from producer to final consumer. At even modest rates, cascade taxes are highly distorting. The VAT solves this problem elegantly, by allowing firms to credit the tax already paid on their inputs against the tax imposed on their sales. The net tax payable is therefore a fixed proportion of value-added. ..." "Like the metric system, the VAT was adopted by other European countries, and the use of a VAT was made a condition of membership of the European Union. Once again, the English-speaking countries had less need to make the change, and were slower to do so. Their income tax systems were more effective, and their wholesale and retail sales taxes were less distorting than cascade taxes. ..." |