Many EU countries have a “VAT” and like feel like this is kinda targeting poor people. Like, for the rich, this is insignificant, for poorer people, a (example) 20% tax would be a huge burden. Why do they do this?
🤔
Many EU countries have a “VAT” and like feel like this is kinda targeting poor people. Like, for the rich, this is insignificant, for poorer people, a (example) 20% tax would be a huge burden. Why do they do this?
🤔
You probably mean the sales taxes, those look similar from a consumer point of view, but they work differently.
In a VAT system the taxes are collected all along the value addition chain. Each sale of intermediary products has the VAT cost on it, but companies can claim the VAT that they pay for their inputs against the one they collected on their outputs. In effect each company hands over the part of VAT that is raised on their part of the value addition. In the end it all comes from the consumer who buys the final product but doesn’t sell anything onward so they can’t claim their paid VAT against anything. This system determines the end consumer automatically.
In a sales tax system, only the sale to the final end customer is taxed, and intermediary products are not taxed. Intermediary companies must prove to their suppliers that they are not end customers, that they intend to sell things onward, and that they are therefore exempted from sales tax and the supplier does not have to collect sales tax. If that fails, then that means mistakenly a company has to pay sales tax, and then their customer has to pay it again.
Other than that I don’t know enough to compare: