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0 pointsMaarten886y ago0 comments

In my country, my company has to pay 21% VAT. For a dollar in sales we have to add 21% in taxes. But we deduct the VAT paid, so if we had to buy stuff for 95 cents, we'd get back the VAT paid on that, resulting in having to pay taxes only on the difference, being 5 cents x 21%, approx 1 cent. Hence it being called "value added tax".

I think this is a better tax than income taxes because it taxes consumption, not labor (although if you do work to add value this does get taxed).

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Fordec6y ago

Except then it affects poor people more as consumption of things that people need makes up more of their income than the rich who have more disposable income, savings, capital and investments. Thus driving even more wealth inequality. But HN readers are more of the "Temporarily Embarrassed Millionaire" types...

ex_ex_nihilo6y ago

So you don't apply VAT to inelastic commodities. We have in fact figured this shit out. Austrian or Keynesian are not the only two choices available to us, despite what some would try to lead you to believe.

chatmasta6y ago

Many companies explicitly pass VAT to the consumer. For example, I have to pay VAT as a line item on the rent for my coworking space.

VAT is the reason a MacBook is hundreds of dollars more expensive to buy in Europe than in the US.

I’m an American living in UK. I bought a jacket here, wore it home, and then forgot it, so I had my mom send it to be in the UK (where I bought it). She declared its value and so I had to pay £35 in VAT for a jacket I bought in the UK for £150.

VAT also makes it difficult for companies in a VAT jurisdiction to compete on price with companies in other jurisdictions, and for small businesses to sell internationally.

I’m not sure I’ve ever heard someone talk about how great VAT is. It’s a system you implement when your country fails to innovate and instead siphons off the innovation of others.

Maarten88OP6y ago

I don't like paying taxes either, but we have to fund our government and the services it provides somehow, right?

If you rent a space and buy a Mac for work you can probably get the VAT you paid back, deducting if from the VAT you add to your own invoices.

Income tax and VAT are the biggest taxes here, what I am saying is that income tax is worse because it hurts jobs directly. VAT does distort pricing internationally, as you say. If all countries would have the same it would be better for everyone.

It would be even better if we could tax capital and corporate profits more, but powerful forces work against that.

Of course we can also not sufficiently fund the government and gut it. We'll see in a decennium or two how that works out in the US.

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