Value Added Tax

The US has no Value Added Tax (VAT) attached to foreign imports, but most other countries do have the VAT Tax. It’s a national sales tax on imported and exported goods. It is not negotiated with trading partners like a Tariff, it is simply imposed by these foreign governments as a sales tax with lots of carve-outs. This is a government revenue raiser charged to consumers. When Europe went socialist, their governments adopted the VAT tax to add to their revenue.  These European governments poured $Trillions into UN Agenda 21 implementation based on the global warming hoax and ran up government debt.  Many poor and third-world countries also adopted the VAT in order to have some revenue. The VAT is a convoluted way to do a consumption tax.
 https://en.wikipedia.org/wiki/Value-added_tax Value-added tax From Wikipedia, the free encyclopedia
Implementation - the standard way to implement a value-added tax involves assuming a business owes some fraction on the price of the product minus all taxes previously paid on the good. By the method of collection, VAT can be accounts-based or invoice-based. Under the invoice method of collection, each seller charges VAT rate on his output and passes the buyer a special invoice that indicates the amount of tax charged. Buyers who are subject to VAT on their own sales (output tax) consider the tax on the purchase invoices as input tax and can deduct the sum from their own VAT liability. The difference between output tax and input tax is paid to the government (or a refund is claimed, in the case of negative liability). Under the accounts based method, no such specific invoices are used. Instead, the tax is calculated on the value added, measured as a difference between revenues and allowable purchases. Most countries today use the invoice method, the only exception being Japan, which uses the accounts method.

By the timing of collection, VAT (as well as accounting in general) can be either accrual or cash based. Cash basis accounting is a very simple form of accounting. When a payment is received for the sale of goods or services, a deposit is made, and the revenue is recorded as of the date of the receipt of funds—no matter when the sale had been made. Cheques are written when funds are available to pay bills, and the expense is recorded as of the cheque date—regardless of when the expense had been incurred.
The primary focus is on the amount of cash in the bank, and the secondary focus is on making sure all bills are paid. Little effort is made to match revenues to the time period in which they are earned, or to match expenses to the time period in which they are incurred. 

Accrual basis accounting matches revenues to the time period in which they are earned and matches expenses to the time period in which they are incurred. While it is more complex than cash basis accounting, it provides much more information about your business. The accrual basis allows you to track receivables (amounts due from customers on credit sales) and payables (amounts due to vendors on credit purchases). The accrual basis allows you to match revenues to the expenses incurred in earning them, giving you more meaningful financial reports.

Registration - In general, countries that have a VAT system require most businesses to be registered for VAT purposes. VAT registered businesses can be natural persons or legal entities, but countries may have different thresholds or regulations specifying at which turnover levels registration becomes compulsory. VAT-registered businesses are required to add VAT on goods and services that they supply to others (with some exceptions, which vary by country) and account for the VAT to the taxing authority, after deducting the VAT that they paid on the goods and services they acquired from other VAT-registered businesses.

Value-added tax avoids the cascade effect of sales tax by taxing only the value added at each stage of production. For this reason, throughout the world, VAT has been gaining favor over traditional sales taxes. In principle, VAT applies to all provisions of goods and services. VAT is assessed and collected on the value of goods or services that have been provided every time there is a transaction (sale/purchase). The seller charges VAT to the buyer, and the seller pays this VAT to the government. If, however, the purchasers are not the end users, but the goods or services purchased are costs to their business, the tax they have paid for such purchases can be deducted from the tax they charge to their customers. The government only receives the difference; in other words, it is paid tax on the gross margin of each transaction, by each participant in the sales chain.

In many developing countries such as India, sales tax/VAT are key revenue sources as high unemployment and low per capita income render other income sources inadequate. However, there is strong opposition to this by many sub-national governments as it leads to an overall reduction in the revenue they collect as well as of some autonomy.

Imports and exports - Being a consumption tax, VAT is usually used as a replacement for sales tax. Ultimately, it taxes the same people and businesses the same amounts of money, despite its internal mechanism being different. There is a significant difference between VAT and Sales Tax for goods that are imported and exported: VAT is charged for a commodity that is exported while sales tax is not. Sales tax is paid for the full price of the imported commodity, while VAT is expected to be charged only for value added to this commodity by the importer and the reseller.

This means that, without special measures, goods will be taxed twice if they are exported from one country that does have VAT to another country that has sales tax instead. Conversely, goods that are imported from a VAT-free country into another country with VAT will result in no sales tax and only a fraction of the usual VAT. There are also significant differences in taxation for goods that are being imported / exported between countries with different systems or rates of VAT. Sales tax does not have those problems – it is charged in the same way for both imported and domestic goods, and it is never charged twice.

To fix this problem, nearly all countries that use VAT use special rules for imported and exported goods: All imported goods are charged VAT tax for their full price when they are sold for the first time. All exported goods are exempted from any VAT payments. For these reasons VAT on imports and VAT rebates on exports form a common practice approved by the World Trade Organization (WTO).

Even in the case in which a country with a VAT remits exports, price distortions do not occur. A U.S. producer exporting a car to Germany will not be charged the U.S. sales tax, but will be charged the VAT. Since a German domestic producer will also be charged a VAT, both companies are on equal footing in Germany. Similarly, a U.S. company selling a car domestically will be charged a sales tax as will the German manufacturer attempting to sell in the U.S. However, if Germany did not remit the VAT on export, the German producer would be charged both the sales tax and the VAT tax, thus facing a price distortion. The usage of VAT remittance on exports helps ensure that export price distortion does not occur.

Australia - The goods and services tax (GST) is a value-added tax introduced in Australia in 2000, which is collected by the Australian Tax Office. The revenue is then redistributed to the states and territories via the Commonwealth Grants Commission process. In essence, this is Australia's program of horizontal fiscal equalization. Whilst the rate is currently set at 10%, there are many domestically consumed items that are effectively zero-rated (GST-free) such as fresh food, education, and health services, certain medical products, as well as exemptions for Government charges and fees that are themselves in the nature of taxes.

Bangladesh - Value-added tax in Bangladesh was introduced in 1991 replacing Sales Tax and most of Excise Duties. The Value Added Tax Act, 1991 was enacted that year and VAT started its passage from 10 July 1991. The 10 July is observed as National VAT Day in Bangladesh. Within the passage of 25 years, VAT has become the largest source of Government Revenue. About 56% of total tax revenue is VAT revenue in Bangladesh. Standard VAT rate is 15%. Export is Zero rated. Besides these rates, there are several reduced rates locally called Truncated Rate for service sectors that are available. Different rates for different services are applied. Truncated Rates are 1.5%, 2.25%, 2.5%, 3%, 4%, 4.5%, 5%, 5.5%, 6%, 7.5%, 9% and 10%.
Bangladesh VAT is characterized by many distortions, i.e., value declaration for products and services, branch registrations, tariff values, truncated rates, many restrictions on credit system, lump-sum VAT (package VAT) advance payment of VAT, excessive exemptions etc. For many distortions, VAT-GDP ratio is about 4% here. To increase the productivity of VAT, Government enacted the Value Added Tax and Supplementary Duty Act of 2012. This law was initially scheduled to operate with an automated administration from 1 July 2017, however the project has now been extended for another two years. National Board of Revenue 1 is the apex organization administering the Value Added Tax.

Canada - Goods and Services Tax (GST) is a value-added tax introduced by the Federal Government in 1991 at a rate of 7%, later reduced to the current rate of 5%. A Harmonized Sales Tax (HST; combined GST and provincial sales tax) is collected in New Brunswick (15%), Newfoundland (15%), Nova Scotia (15%), Ontario (13%), Prince Edward Island (15%), and, for a short time until 2013, British Columbia (12%). (Quebec has a de facto 14.975% HST: its provincial sales tax follows the same rules as the GST, and both are collected together by Revenu Québec.) Advertised and posted prices generally exclude taxes, which are calculated at time of payment; common exceptions are motor fuels, the posted prices for which include sales and excise taxes, and items in vending machines as well as alcohol in monopoly stores. Basic groceries, prescription drugs, inward/outbound transportation and medical devices are exempt.

China - VAT was implemented in China in 1984 and is administered by the State Administration of Taxation. In 2007, the revenue from VAT was 15.47 billion yuan ($2.2 billion) which made up 33.9 percent of China's total tax revenue for the year. The standard rate of VAT in China is 17%. There is a reduced rate of 13% that applies to products such as books and types of oils. 

The European Union value added tax (EU VAT) covers consumption of goods and services and is mandatory for member states of the European Union. The EU VAT's key issue asks where the supply and consumption occurs thereby determining which member state will collect the VAT and which VAT rate will be charged.Each member state's national VAT legislation must comply with the provisions of EU VAT law, which requires a minimum standard rate of 15% and one or two reduced rates not to be below 5%. Some EU members have a 0% VAT rate on certain supplies; these states would have agreed this as part of their EU Accession Treaty (for example, newspapers and certain magazines in Belgium). Certain goods and services must be exempt from VAT (for example, postal services, medical care, lending, insurance, betting), and certain other goods and services to be exempt from VAT but subject to the ability of an EU member state to opt to charge VAT on those supplies (such as land and certain financial services). The highest rate currently in operation in the EU is 27% (Hungary), though member states are free to set higher rates. There is, in fact only one EU country (Denmark) that does not have a reduced rate of VAT.

Gulf Cooperation Council - Increased growth and pressure on the GCC's governments to provide infrastructure to support growing urban centers, the Member States of the Gulf Co-operation Council (GCC), which together make up the Gulf Co-operation Council (GCC), have felt the need to introduce a tax system in the region.

Indonesia - Value Added Tax (VAT) was introduced into the Indonesian taxation system from 1 April 1985. General VAT rate is ten percent. Using indirect subtraction method with invoice to calculate value added tax payable. VAT was collected by the Directorate General of Taxation, Ministry of Finance. Some goods and services are exempt from VAT like basic commodities vital to the general public, medical or health services, religion services, educational services and Services provided by the government in respect of carrying out general governmental administration.

Malaysia - The goods and services tax (GST) is a value-added tax introduced in Malaysia in 2015, which is collected by the Royal Malaysian Customs Department. The standard rate is currently set at 6%. Many domestically consumed items such as fresh foods, water and electricity are zero-rated, while some supplies such as education and health services are GST exempted.

Mexico - Value-added tax - As of 2010, the general VAT rate was 16%. This rate was applied all over Mexico except for bordering regions (i.e. the United States border, or Belize and Guatemala), where the rate was 11%. The main exemptions are for books, food, and medicines on a 0% basis. Also some services are exempt like a doctor's medical attention. In 2014 Mexico Tax Reforms eliminated the favorable tax rate for border regions and increased the VAT to 16% across the country.

Nepal - VAT was implemented in 1998 and is the major source of government revenue. It is administered by Inland Revenue Department of Nepal. Nepal has been levying two rates of VAT: Normal 13% and zero rate. In addition, some goods and services are exempt from VAT.

New Zealand - The goods and services tax (GST) is a value-added tax that was introduced in New Zealand in 1986, currently levied at 15%. It is notable for exempting few items from the tax. From July 1989 to September 2010, GST was levied at 12.5%, and prior to that at 10%.

South Africa - Value-added tax (VAT) in South Africa was set at a rate of 14% and remained unchanged since 1993. Finance Minister Malusi Gigaba announced on 21 February 2018 that the VAT rate will be increased by one percentage point to 15%. Some basic food stuffs, as well as paraffin, will remain zero rated. The new rate is to be effective from 1 April 2018.

Switzerland and Liechtenstein - Switzerland has a customs union with Liechtenstein that also includes the German exclave of Büsingen am Hochrhein and the Italian exclave of Campione d'Italia. The Switzerland–Liechtenstein VAT area has a general rate of 7.7%.

Trinidad and Tobago - Value-added tax (VAT) in T&T is currently 12.5% as of February 1, 2016. Before that date VAT used to be at 15%.

Ukraine - In Ukraine, the revenue to state budget from VAT is the most significant. By Ukraine tax code, there are 3 VAT tax rates in Ukraine. 20% (general tax rate; applied to most goods and services), 7% (special tax rate; applied mostly to medicines and medical products import and trade operations) and 0% (special tax rate; applied mostly to export of goods and services, international transport of passengers, baggage and cargo).

United States - Further information: Sales taxes in the United States. In the United States, currently, there is no federal value-added tax (VAT) on goods or services. Instead, a sales and use tax is used in most US states. VATs have been the subject of much scholarship in the US and are one of the most contentious tax policy topics.

Vietnam - Value-added tax (VAT) in Vietnam is a broadly based consumption tax assessed on the value added to goods and services arising through the process of production, circulation, and consumption. It's an indirect tax in Vietnam on domestic consumption applied nationwide rather than at different levels such as state, provincial or local taxes. It is a multi-stage tax which is collected at every stage of the production and distribution chain and passed on to the final customer. It is applicable to the majority of goods and services bought and sold for use in the country. Goods that are sold for export and services that are sold to customers abroad are normally not subject to VAT.
https://en.wikipedia.org/wiki/Value-added_tax
 

A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of general consumption tax that is collected incrementally, based on the increase in value of a product or service at each stage of production or distribution.

VAT is usually implemented as a destination-based tax, where the tax rate is based on the location of the customer. VATs raise about a fifth of total tax revenues both worldwide and among the members of the Organization for Economic Co-operation and Development (OECD). 

As of 2018, 166 of the world's approximately 193 countries employ a VAT, including all OECD members except the United States, which uses a sales tax system instead.

There are two main methods of calculating VAT: the credit-invoice or invoice-based method, and the subtraction or accounts-based method.

Using the credit-invoice method, sales transactions are taxed, with the customer informed of the VAT on the transaction, and businesses may receive a credit for VAT paid on input materials and services.

The credit-invoice method is the most widely employed method, used by all national VATs except for Japan. Using the subtraction method, at the end of a reporting period, a business calculates the value of all taxable sales then subtracts the sum of all taxable purchases and the VAT rate is applied to the difference.

The subtraction method VAT is currently only used by Japan, although subtraction method VATs, often using the name "flat tax", have been part of many recent tax reform proposals by US politicians. With both methods, there are exceptions in the calculation method for certain goods and transactions, created for either pragmatic collection reasons or to counter tax fraud and evasion.

Germany and France were the first countries to implement VAT, doing so in the form of a general consumption tax during World War I. The modern variation of VAT was first implemented by France in the 1950s. Maurice Lauré, Joint Director of the France Tax Authority, the Direction Générale des Impôts implemented the VAT on 10 April 1954, although German industrialist Dr. Wilhelm von Siemens proposed the concept in 1918. Initially directed at large businesses, it was extended over time to include all business sectors.

In France, it is the most important source of state finance, accounting for nearly 50% of state revenues.

A 2017 study found that the adoption of VAT is strongly linked to countries with corporatist institutions.

The amount of VAT is decided by the state as percentage of the end-market price. As its name suggests, value-added tax is designed to tax only the value added by a business on top of the services and goods it can purchase from the market.

To understand what this means, consider a production process (e.g., take-away coffee starting from coffee beans) where products get successively more valuable at each stage of the process. When an end-consumer makes a purchase, they are not only paying for the VAT for the product at hand (e.g., a cup of coffee), but in effect, the VAT for the entire production process (e.g., the purchase of the coffee beans, their transportation, processing, cultivation, etc.), since VAT is always included in the prices.

The value-added effect is achieved by prohibiting end-consumers from recovering VAT on purchases, but permitting businesses to do so. The VAT collected by the state is computed as the difference between the VAT of sales earnings and the VAT of those goods and services upon which the product depends. The difference is the tax due to the value added by the business. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction.

In theory, sales tax is normally charged on end users (consumers). The VAT mechanism means that the end-user tax is the same as it would be with a sales tax. The main disadvantage of VAT is the extra accounting required by those in the middle of the supply chain; this is balanced by the simplicity of not requiring a set of rules to determine who is and is not considered an end user. When the VAT system has few, if any, exemptions such as with GST in New Zealand, payment of VAT is even simpler.

A general economic idea is that if sales taxes are high enough, people start engaging in widespread tax evading activity (like buying over the Internet, pretending to be a business, buying at wholesale, buying products through an employer etc.). On the other hand, total VAT rates can rise above 10% without widespread evasion because of the novel collection mechanism. However, because of its particular mechanism of collection, VAT becomes quite easily the target of specific frauds like carousel fraud, which can be very expensive in terms of loss of tax incomes for states.

A VAT, like most taxes, distorts what would have happened without it. Because the price for someone rises, the quantity of goods traded decreases. Correspondingly, some people are worse off by more than the government is made better off by tax income. That is, more is lost due to supply and demand shifts than is gained in tax. This is known as a deadweight loss. If the income lost by the economy is greater than the government's income; the tax is inefficient. It must be noted that a VAT and a Non-VAT have the same implications on the microeconomic model.

There are some areas of member states (both overseas and on the European continent) which are outside the EU VAT area, and some non-EU states that are inside the EU VAT area. External areas may have no VAT or may have a rate lower than 15%. Goods and services supplied from external areas to internal areas are considered imported. (See EU VAT area § EU VAT area for a full listing.)

VAT that is charged by a business and paid by its customers is known as "output VAT" (that is, VAT on its output supplies). VAT that is paid by a business to other businesses on the supplies that it receives is known as "input VAT" (that is, VAT on its input supplies). A business is generally able to recover input VAT to the extent that the input VAT is attributable to (that is, used to make) its taxable outputs. Input VAT is recovered by setting it against the output VAT for which the business is required to account to the government, or, if there is an excess, by claiming a repayment from the government. Private people are generally allowed to buy goods in any member country and bring it home and pay only the VAT to the seller. Input VAT that is attributable to VAT-exempt supplies is not recoverable, although a business can increase its prices so the customer effectively bears the cost of the "sticking" VAT (the effective rate will be lower than the headline rate and depend on the balance between previously taxed input and labor at the exempt stage).

In particular, the United Arab Emirates (UAE) on 1 January 2018 implemented VAT. For companies whose annual revenues exceed $102,000 (Dhs 375,000), registration is mandatory. Oman’s Minister of Financial Affairs indicated that GCC countries have agreed the introductory rate of VAT is 5%. The Kingdom of Saudi Arabia VAT system was implemented in 01 January 2018 at 5% rate.India - VAT was introduced into the Indian taxation system from 1 April 2005. Of the then 28 Indian states, eight did not introduce VAT at first instance. There is uniform VAT rate of 5% and 14.5% all over India. The government of Tamil Nadu introduced an act by the name Tamil Nadu Value Added Tax Act 2006 which came into effect from the 1 January 2007. It was also known as the TN-VAT. Under the BJP government, a new national Goods and Services Tax was introduced under the One Hundred and First Amendment of the Constitution of India.

In Denmark, VAT is generally applied at one rate, and with few exceptions is not split into two or more rates as in other countries (e.g. Germany), where reduced rates apply to essential goods such as foodstuffs. The current standard rate of VAT in Denmark is 25%. That makes Denmark one of the countries with the highest value-added tax, alongside Norway, Sweden and Croatia. A number of services have reduced VAT, for instance public transportation of private persons, health care services, publishing newspapers, rent of premises (the lessor can, though, voluntarily register as VAT payer, except for residential premises), and travel agency operations.

In Finland, the standard rate of VAT is 24% as of 1 January 2013 (raised from previous 23%), along with all other VAT rates, excluding the zero rate. In addition, two reduced rates are in use: 14% (up from previous 13% starting 1 January 2013), which is applied on food and animal feed, and 10%, (increased from 9% 1 January 2013) which is applied on passenger transportation services, cinema performances, physical exercise services, books, pharmaceuticals, entrance fees to commercial cultural and entertainment events and facilities.

Supplies of some goods and services are exempt under the conditions defined in the Finnish VAT Act: hospital and medical care; social welfare services; educational, financial and insurance services; lotteries and money games; transactions concerning bank notes and coins used as legal tender; real property including building land; certain transactions carried out by blind persons and interpretation services for deaf persons. The seller of these tax-exempt services or goods is not subject to VAT and does not pay tax on sales. Such sellers therefore may not deduct VAT included in the purchase prices of his inputs. Åland, an autonomous area, is considered to be outside the EU VAT area, even if its VAT rate is the same as for Finland. Goods brought from Åland to Finland or other EU countries is considered to be export/import. This enables tax free sales onboard passenger ships.

In Iceland, VAT is split into two levels: 24% for most goods and services but 11% for certain goods and services. The 11% level is applied for hotel and guesthouse stays, licence fees for radio stations (namely RÚV), newspapers and magazines, books; hot water, electricity and oil for heating houses, food for human consumption (but not alcoholic beverages), access to toll roads and music.

In Norway, VAT is split into three levels: 25% general rate, 15% on foodstuffs and 10% on the supply of passenger transport services and the procurement of such services, on the letting of hotel rooms and holiday homes, and on transport services regarding the ferrying of vehicles as part of the domestic road network. The same rate applies to cinema tickets and to the television licence. Financial services, health services, social services and educational services are all outside the scope of the VAT Act. Newspapers, books and periodicals are zero-rated. Svalbard has no VAT because of a clause in the Svalbard Treaty.

In Sweden, VAT is split into three levels: 25% for most goods and services, 12% for foods including restaurants bills and hotel stays and 6% for printed matter, cultural services, and transport of private persons. Some services are not taxable for example education of children and adults if public utility, and health and dental care, but education is taxable at 25% in case of courses for adults at a private school. Dance events (for the guests) have 25%, concerts and stage shows have 6%, and some types of cultural events have 0%.

In 2015, Puerto Rico passed legislation to replace its 6% sales and use tax with a 10.5% VAT beginning 1 April 2016, although the 1% municipal sales and use tax will remain and, notably, materials imported for manufacturing will be exempted. In doing so, Puerto Rico will become the first US jurisdiction to adopt a value-added tax. However, two states have previously enacted a form of VAT as a form of business tax in lieu of a business income tax, rather than a replacement for a sales and use tax.

The state of Michigan used a form of VAT known as the "Single Business Tax" (SBT) as its form of general business taxation. It is the only state in the United States to have used a VAT. When it was adopted in 1975, it replaced seven business taxes, including a corporate income tax. On 9 August 2006, the Michigan Legislature approved voter-initiated legislation to repeal the Single Business Tax, which was replaced by the Michigan Business Tax on 1 January 2008.

The state of Hawaii has a 4% General Excise Tax (GET) that is charged on the gross income of any business entity generating income within the State of Hawaii. The State allows businesses to optionally pass on their tax burden by charging their customers a quasi sales tax rate of 4.166%. The total tax burden on each item sold is more than the 4.166% charged at the register since GET was charged earlier up the sales chain (such as manufacturers and wholesalers), making the GET less transparent than a retail sales tax.

All organizations and individuals producing and trading VAT taxable goods and services in Vietnam have to pay VAT, regardless of whether they have Vietnam-based resident establishments or not. Vietnam has three VAT rates: 0 percent, 5 percent and 10 percent. 10 percent is the standard rate applied to most goods and services unless otherwise stipulated. A variety of goods and service transactions may qualify for VAT exemption.

The VAT Tax in EU countries ranges from 17% to 25%. Lower VAT Tax rates range from 7% to 18% that apply to specific goods and services determined by the country.

For all other countries who have a VAT Tax, the tax ranges from 5% to 25% and reduced rates vary.

There are about 50 countries, including the US that don’t have a VAT Tax.

The "value-added tax" has been criticized as the burden of it falls on personal end-consumers of products. Some critics consider it to be a regressive tax, meaning that the poor pay more, as a percentage of their income, than the rich.

Defenders argue that relating taxation levels to income is an arbitrary standard, and that the value-added tax is in fact a proportional tax in that people with higher income pay more in that they consume more.

The effective progressiveness or regressiveness of a VAT system can also be affected when different classes of goods are taxed at different rates. To maintain the progressive nature of total taxes on individuals, countries implementing VAT have reduced income tax on lower income-earners as well as instituted direct transfer payments to lower-income groups, resulting in lower tax burdens on the poor.

Revenues from a value-added tax are frequently lower than expected because they are difficult and costly to administer and collect.  In many countries, however, where collection of personal income taxes and corporate profit taxes has been historically weak, VAT collection has been more successful than other types of taxes.

VAT has become more important in many jurisdictions as tariff levels have fallen worldwide due to trade liberalization, as VAT has essentially replaced lost tariff revenues.

Whether the costs and distortions of value-added taxes are lower than the economic inefficiencies and enforcement issues (e.g. smuggling) from high import tariffs is debated, but theory suggests value-added taxes are far more efficient.

Certain industries (small-scale services, for example) tend to have more VAT avoidance, particularly where cash transactions predominate, and VAT may be criticized for encouraging this.  From the perspective of government, however, VAT may be preferable because it captures at least some of the value added. For example, a building contractor may offer to provide services for cash (i.e. without a receipt, and without VAT) to a homeowner, who usually cannot claim input VAT back. The homeowner will thus bear lower costs and the building contractor may be able to avoid other taxes (profit or payroll taxes).

Another avenue of criticism of implementing a VAT is that the increased tax passed to the consumer will increase the ultimate price paid by the consumer. However, a study in Canada reveals that in fact when replacing a traditional sales tax with a VAT consumer prices including taxes actually fell, by –0.3%±0.49%.

Because exports are generally zero-rated (and VAT refunded or offset against other taxes), this is often where VAT fraud occurs. In Europe, the main source of problems is called carousel fraud. This kind of fraud originated in the 1970s in the Benelux countries. Today, VAT fraud is a major problem in the UK.  There are also similar fraud possibilities inside a country. To avoid this, in some countries like Sweden, the major owner of a limited company is personally responsible for taxes.

Under a sales tax system, only businesses selling to the end-user are required to collect tax and bear the accounting cost of collecting the tax. Under VAT, manufacturers and wholesale companies also incur accounting expenses to handle the additional paperwork required for collecting VAT, increasing overhead costs and prices.

Many politicians and economists in the United States consider VAT taxation on US goods and VAT rebates for goods from other countries to be unfair practice. E.g. the American Manufacturing Trade Action Coalition claims that any rebates or special taxes on imported goods should not be allowed by the rules of the World Trade Organization.

AMTAC claims that so-called "border tax disadvantage" is the greatest contributing factor to the $5.8 trillion US current account deficit for the decade of the 2000s, and estimated this disadvantage to US producers and service providers to be $518 billion in 2008 alone. Some US politicians, such as Congressman Bill Pascrell, are advocating either changing WTO rules relating to VAT or rebating VAT charged on US exporters by passing the Border Tax Equity Act. A business tax rebate for exports is also proposed in the 2016 GOP policy paper for tax reform. The assertion that this "border adjustment" would be compatible with the rules of the WTO is controversial; it was alleged that the proposed tax would favor domestically produced goods as they would be taxed less than imports, to a degree varying across sectors. For example, the wage component of the cost of domestically produced goods would not be taxed.

Norb Leahy, Dunwoody GA Tea Party Leader