Dear members of great thinkers try to read the notes below and relate it to the explanations given by one of the TRA leaders few days after the national budget being approved and passed by the Parliament.
Value-Added Tax - VAT
A value-added tax (VAT) is a type of
consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. The amount of VAT that the user pays is the cost of the product, less any of the costs of materials used in the product that have already been taxed.
Proponents of a VAT suggest that replacing the current income tax system with a federal VAT would make it much more difficult to evade paying taxes. They claim it would also greatly simplify the complex federal
tax code and increase the efficiency of the
Internal Revenue Service.
Opponents, however, note many potential drawbacks of a VAT, including increased costs for business owners throughout the chain of production. A federal VAT could also create conflicts with state and local governments across the country, which charge their own
sales taxes at rates set at the state and local levels.
Critics also note that consumers typically wind up paying higher prices with a VAT. While the VAT theoretically spreads the tax burden along every phase of manufacturing from raw goods to final product, in practice, increased costs are typically passed along to the consumer.
In contrast to the current income tax, which levies more taxes on high-level earners than on low-income workers, a VAT would apply equally to every purchase. This could significantly benefit taxpayers with high incomes, who typically spend far less than they earn and save a large portion of their income. Since low-income workers often live from paycheck to paycheck and spend their entire income every month, they would pay a much higher proportion of their income in taxes with a VAT system than wealthy earners.