Re:U.S. business contributes smallest share of federal taxes...
by mcv on Thursday May 23, 2019 @09:23AM
(#19991509)
It is different, because the amount the wholesaler bought it for is not the only cost he has. He also has rent, labour and who knows what else, and not all of those withhold VAT on their end. In fact, in business-to-business transactions, VAT is often ignored, because the only that matters is the value at the end point where it's sold to the consumer or another non-VAT-paying entity.
At the end point, VAT is a revenue tax, not a profit tax. And revenue is certainly not the same thing as profit.
Income tax is really the same thing. A retailer sells a widget for $100 which it bought for $90, so it pays tax on the $10 in profit. The wholesaler bought the widget for $80 and sold it for $90, so it pays tax on another $10. If you go all the way back to the mine that produced the raw materials that were manufactured into the goods, the entire $100 is profit to somebody. It's the same as VAT. Calling it "profit" rather than "value added" is a distinction without a difference.
An exception as you point out is the treatment for domestic labor, but even that's just an accounting anomaly rather than a real exception -- the worker doesn't collect VAT on their "profits" (wages) but then, no deposit no return, the employer can't deduct them. The real scam is when wages aren't deductible from VAT and yet are still subject to personal income tax, which means they're being double taxed. That is one of the few things the US corporate income tax gets right.
> If you subtract all costs within that market, including labour, it suddenly becomes more attractive to hire labour in the same market where you're selling.
If you like VAT you may enjoy DBCFT.