Value Added Tax
The Value-Added Tax: Is It Good for the United States?
Michael D. Cobb BUS490 Business Policy Professor: Robert Brown May 29, 2011
The individual federal income tax system used in our country is currently extremely complicated. It is so complicated that the tax code started with about 400 pages long in 1913 to over 70k pages long today (CCH, 2010). It benefits higher income individuals leaving those that are at or below the poverty line in a struggle. Our government is currently looking for solutions or alternatives to the current system being used in this country. The value added tax system is another alternative to our present tax system. The value-added tax is considered a broad based indirect consumption tax with fiscal long term issues. It is levied on goods and services at all stages of production from raw material to the final product. The value added tax is imposed on value additions at various production stages. This tax system is mainly used in European countries as well as many others around the globe (Economywatch, 2001). The concept originated in France as TVA (taxe sur la valeur ajoutee) by French economist Maurice Laure in 1954 as one of the state’s major finance sources. With the use of the tax system, government could invisibly raise revenues with the tax not showing on bills paid by buyers. It differs from the sales tax in that it is levied all exchanges of the product and not on the total value of the goods and services so the buyer does not have to shoulder the total cost of the tax. Conversely, the tax is not applied on exports goods to steer clear of taxing the final product twice. If export goods are charged, the amount of the tax is refunded to the person paying the tax (Economywatch, 2001). The VAT cannot be recovered on purchases made by individual consumers. Business can only recover the tax on services and materials that they buy to continue product supply and service.
Michael D. Cobb BUS490 Business Policy Professor: Robert Brown May 29, 2011
The individual federal income tax system used in our country is currently extremely complicated. It is so complicated that the tax code started with about 400 pages long in 1913 to over 70k pages long today (CCH, 2010). It benefits higher income individuals leaving those that are at or below the poverty line in a struggle. Our government is currently looking for solutions or alternatives to the current system being used in this country. The value added tax system is another alternative to our present tax system. The value-added tax is considered a broad based indirect consumption tax with fiscal long term issues. It is levied on goods and services at all stages of production from raw material to the final product. The value added tax is imposed on value additions at various production stages. This tax system is mainly used in European countries as well as many others around the globe (Economywatch, 2001). The concept originated in France as TVA (taxe sur la valeur ajoutee) by French economist Maurice Laure in 1954 as one of the state’s major finance sources. With the use of the tax system, government could invisibly raise revenues with the tax not showing on bills paid by buyers. It differs from the sales tax in that it is levied all exchanges of the product and not on the total value of the goods and services so the buyer does not have to shoulder the total cost of the tax. Conversely, the tax is not applied on exports goods to steer clear of taxing the final product twice. If export goods are charged, the amount of the tax is refunded to the person paying the tax (Economywatch, 2001). The VAT cannot be recovered on purchases made by individual consumers. Business can only recover the tax on services and materials that they buy to continue product supply and service.
References: Bickley, J. M. (2011). Value Addded Tax as a Revenue Option: A Primer. Washington DC: Congressional Research Services. CCH. (2010, January). Standard Federal Tax Reportr. Retrieved June 2011, from CCHGroup.com: http://tax.cchgroup.com/FED/default.htm?cookie%5Ftest=1 Deutch, R. (2010, May). 6 Pros and Cons of Value Added Taxes. Retrieved May 2011, from Going Legal: http://www.goinglegal.com/article_1574534_75.html Economywatch. (2001). Investment & Finance Report. Retrieved May 2011, from Economy Watch: http://www.economywatch.com/business-and-economy/definition.html Ensinger, D. (2011, April). VAT Has Advantages. Retrieved May 2011, from Economy In Crisis: http://www.economyincrisis.org/content/vat-has-advantages Gale, W. (20005, March 3). The Pros and Cons of a Consumption Tax. (R. Suarez, Interviewer) Murphy, C. (2010, April). VAT: Will the U.S. Adopt a Value-Added Tax? Retrieved May 2011, from CBS News Business: http://www.cbsnews.com/8301-503983_162-20001918-503983.html