What amazes me is that they try to sell the worst possible marriage of an income tax and a VAT as "reform".
What amazes me is that they try to sell the worst possible marriage of an income tax and a VAT as "reform".
What's worse, the APT is little more than the French turnover taxes, that resulted in the adoption of the VAT to reduce the dislocations and severe burden on business activity caused by their pre-WWII APT style tax system.
Used google to investigate the history of turnover taxes and how they relate to the European VAT.
The payment transaction tax is hardly new, just a warmed over version, with high tech flourishes and the serial numbers filed off, of the old European turnover taxes. The APT just taxes the same thing more times to drop the per turnover tax rate.
A little Information about taxes on the gross value of transactions, (i.e. turnover tax) and why Europe gave them up in favor of the other problematic tax, the VAT:
Public Finance Government Revenues and Expenditures in the United States Economy http://garnet.acns.fsu.edu/~holcombe/ CHAPTER 12 Page 235-236 Turnover Taxes:
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abit more:
http://www.britannica.com/eb/print?tocId=9108616&fullArticle=true
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A little history on the turnover tax:
John Quiggin - News Articles - GST9806 Australian Financial Review 4 June 1998
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More on the ubiquitous transaction tax (i.e. turnover tax; aka general sales tax)
http://old.ucipr.kiev.ua/english/ers/35/3507.html Problems of and Prospects for Alternative Sales Tax in the Ukrainian Taxation System
By Valentyn Tregobchuk, doctor of economics, professor, head of the department for resource potential at the Economy Institute of the National Academy of Ukraine; *** SNIP *** From the theoretical viewpoint, the sales tax and the VAT are analogous, since they both are indirect taxes on consumption and represent different forms of the same tax collected at each stage of commodity production and turnover. The only difference between those taxes is tax article, to which tax rate is applied. In other words, the sales tax is levied on gross turnover and the VAT on net one. Though, in the practice of application of sales tax the above difference engenders numerous negative consequences the economic theory has not dealt with since early 20th century, when their major drawbacks related to the nature of tax article became evident. As the sales tax is levied on the whole sales value, inclusive of raw materials cost, should this tax be applied in the event of several production and turnover stages, it will generate a cumulative effect or that of sequential growth of tax burden. Proceeding from the above, tax burden depends on the distance from the manufacturer to the consumer. The higher is value, including wages and profit, added by a company operating at the initial production stage, the stronger is the cumulative effect. Hence, in this respect, the nature of tax burden is uneven and sporadic, for it depends not on the companys performance but on its role in production chain and the number of technological cycles. Such an approach to taxation stimulates considerable increase of tax burden, first and foremost, that on consumer goods and food enterprises, processing branches of the agro-industrial complex, wood-processing, pulp and paper industries, machine building etc. It turns out that within the same branch, enterprises manufacturing products using high-grade and more expensive raw materials experience much more difficulties. Such a situation engenders incentives to vertical integration, i.e. consolidation of technologically related enterprises, determining higher level of economys monopolization. Monopolies that emerged to optimize tax payments are not interested in cooperation with any intermediate parties, small and medium enterprises offer no incentives to competition. So, small and medium business declines, as companies cannot stand price competition with monopolies. After the World War II, in the majority of states, the sales tax was not imposed due to the above reasons. However, further growth of fiscal needs urged a number of countries to seek for alternative types of indirect taxation. In 1954, France substituted the sales tax for the VAT and pioneered in change of consumer tax structure. |