Value added tax

 

A value added tax is frequently called 'Goods and Service Tax'. It is known as Sales Tax, Business Tax, or Turnover Tax in some countries and it applies the equivalent of a sales tax to each operation that makes value.

A value added tax can be easily explained on an example. A machine manufacturer is responsible for sheet steel import. The value added tax is levied on the purchase price. After the steel is transformed into a machine the value of the product rises. As a result, a manufacturer sells the machine for a higher price to a wholesale distributor and collects the value added tax on the higher price. He pays to the government the excess related to the value that has been added. The process continues because the wholesale distributor charges the retail distributor the value added tax. He remits only the sum related to the distribution mark-up to the government. The last entity involved is a retail customer who pays the entire value added tax. There are contradictory attitudes toward value added taxes. Some theorists criticise this kind of taxation since it minimises the market distortion resulting from the tax. However, if the government` s aim is to discourage production value added taxes are held. In addition, the tax is used when a sales or excise tax collecting do not work. It happens because a sales tax is frequently evaded and the attempts to evade the tax system will not disappear.
An input tax is another kind of taxation. It is imposed if a company buys goods or services from another supplier a value added tax is charged on the purchase cost. The company which sells its own goods and services levied its customers a value added tax at the same rate. It is called an output tax. The company completes a value added tax return which reports the details of the input and output tax. If the sum of an input tax is higher than the sum of an output one the company has right to acquire the money from the Local Tax Authority.
A property tax is charged on the value of some kind of property owned. The tax is levied on a recurrent basis, or it may be collected eventually. An annual charge on the possession of real estate is the most typical type of a property tax. The supposed value of the property is regarded as a tax base. A window tax is known from the history of English tax system. The tax burden was based on the number of windows a particular house had. It was a common phenomenon to brick up the windows in order to save the proprietor` s money.
If the change of a possessor occur stamp duty is charged on the action. An inheritance tax is levied on the estate of the deceased. A land value tax is charged on the unimproved value of the land. The land is considered as either all natural resources or the natural resources related to specific areas of the earth` s surface. It is considered as the only tax which does not distort market relations. According to some economists, land is in fixed supply because it has not been produced or manufactured and its value is publicly created. They propose it should be the only tax base.
A transfer tax is the charge for a stamp affixed that proves the contract is valid. The height of the sum is either fixed or is defined as a percentage of the value of a certain transaction. Stamp duty is imposed although the stamp has been abolished in many countries. This tax burden works in the United Kingdom and is levied on purchase of shares, securities, the issue of bearer instruments, and partnership transactions. The tax has been modified and renovated. It is known as a stamp duty reserve tax and a stamp duty land tax. These taxes are respectively charged on transactions involving securities and land. The disadvantage of stamp duty is its discouraging impact on more speculative trade by decreasing liquidity. A transfer tax is imposed by the state or local government in the US.
Most economists consider an inheritance tax harmless or even beneficial. Sometimes it is assumed to discourage productivity and to disrupt the continuity of family-owned business.
A wealth tax is also called a net worth one. It has been imposed by some countries to make a tax-paying entity to provide the government with balance sheet. A tax payer` s balance sheet means all the assets and liabilities. Net worth is assets minus liabilities. A tax on net worth is described as a percentage of the net worth, or a percentage of the net worth that has exceeded a certain level.