I think it is fascinating to hear so much discussion today about the need for a VAT in the US. All other industrialized countries have a VAT. In fact a VAT is used in over 140 countries today. So, there is a lot of data out there on its effect on the economy, administration, etc.
I don't see that a VAT could replace any federal tax as some propose. But, perhaps as an additional tax that would allow for reduction in the income tax or payroll tax, it could help reduce the deficit (along with spending reforms!).
I have a short article in the AICPA Corporate Taxation Insider today - VAT Mania, with some background and links to additional information, including a website I've maintained for some time that explains how a VAT works and compares it to a sales tax (here).
While the Senate recently passed a resolution opposing a VAT (see link in article), I think that is unfortunate. We should not dismiss something so widely used in the world AND that is already on the table in the US in other forms. Did you know that the "flat tax" is a modified subtraction method VAT? Did you know that the national sales tax is not as efficient in operation as a VAT, but both can raise the same amount of revenue? See links above for details.
What do you think of a US VAT?
Annette Nellen
Professor Annette Nellen
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1 comment:
Yes, being from Australia, I experienced the tortuous implementation of the GST (Goods and Services Tax) in that country. Although it is sold as being a savings stimulus and it reduces consumption by taxing it, it had kept the conservative side of politics in Australia out of government for at least two elections because of its implementation. However, most countries in the world have now replaced sales taxes with VATs.
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