Re:For the first time on record, the 400 wealthiest American...
by sobani on Tuesday October 08, 2019 @05:06AM
(#21190184)
VAT means Value Added Tax. @Forbo's was talking about a transaction tax.
The difference can be explained by this completely made up example:
A steel mill buys iron ore for $1 a kilo and makes steel of that.
A nail factory buys steel for $1.50 a kilo and makes nails of that.
A distributor buys those nails wholesale for $2 a kilo.
A hardware store buys those nails from the wholesaler for $2.50 a kilo.
A contractor buys those nails from the hardware store for $3 a kilo.
The subcontractor bills $3.50 a kilo for those nails.
The general contractor bills you $4 a kilo for those nails.
With VAT you/the general contractor/all businesses involved pay taxes on a total of $4.
With a transaction tax, it would be paid on $17.50.
But the above is a simplified example. In the real world there are probably a lot more businesses (each specializing in their own niche) and therefor transaction involved in getting that nail into your wall.
The difference can be explained by this completely made up example: A steel mill buys iron ore for $1 a kilo and makes steel of that. A nail factory buys steel for $1.50 a kilo and makes nails of that. A distributor buys those nails wholesale for $2 a kilo. A hardware store buys those nails from the wholesaler for $2.50 a kilo. A contractor buys those nails from the hardware store for $3 a kilo. The subcontractor bills $3.50 a kilo for those nails. The general contractor bills you $4 a kilo for those nails.
With VAT you/the general contractor/all businesses involved pay taxes on a total of $4.
With a transaction tax, it would be paid on $17.50.
But the above is a simplified example. In the real world there are probably a lot more businesses (each specializing in their own niche) and therefor transaction involved in getting that nail into your wall.