The example also misses out on the fact that the individual producers (coconut picker, paint maker, etc.) will need to pay self employment tax. That is an extra amount they pay when working for themselves as independent contracts but if they are hired by the cousin's business, that business pays half of the social security and medicare taxes.

For easy numbers, in the independent contractor model, each person pay $0.30 in payroll taxes (before income tax) while in the employee model, the employee only pays $0.15 and the business pays the other $0.15. If gross pay is $1 in both cases, the employee makes more. Because of this, real employers are going to pay salaries of less than $1 to account for overhead like payroll taxes, office space and the risk of providing a steady paycheck vs. paying per production.

I understand the author is simplifying things to make an argument for VAT but there are lots of variables in both scenarios including payroll tax and the option for retailers to purchase goods without paying sales tax to wholesalers.