On VATs: http://en.wikipedia.org/wiki/Value_added_tax "A value added tax or value-added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs. The "value added" to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products. Maurice Lauré, Joint Director of the French Tax Authority, the Direction générale des impôts, was first to introduce VAT on April 10, 1954, although German industrialist Dr. Wilhelm von Siemens proposed the concept in 1918. Initially directed at large businesses, it was extended over time to include all business sectors. In France, it is the most important source of state finance, accounting for nearly 50% of state revenues.[1] Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT (input tax) on the products and services that they buy in order to produce further goods or services that will be sold to yet another business in the supply chain or directly to a final consumer. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. Value added taxes were introduced in part because they create stronger incentives to collect than a sales tax does. Both types of consumption tax create an incentive by end consumers to avoid or evade the tax, but the sales tax offers the buyer a mechanism to avoid or evade the taxâpersuade the seller that he (the buyer) is not really an end consumer, and therefore the seller is not legally required to collect it. The burden of determining whether the buyer's motivation is to consume or re-sell is on the seller, but the seller has no direct economic incentive to collect it. The VAT approach gives sellers a direct financial stake in collecting the tax, and eliminates the problematic decision by the seller about whether the buyer is or is not an end consumer." ...
Yeah, but surely we can't blame VAT for their current predicament? Moreover, Ireland is actually doing quite a lot a better than a whole lot of other places. Finally, according to what I have seen, throughout the 00s, Ireland had the one of the lowest effective personal income tax rates in the whole wide world. I can't confirm the data used for the chart below, but it looks interesting, no? So Ireland is a case of (still, even now) low personal income tax rates, coupled with VAT (which was cut a bit in 2010, by the way). I am not at all suggesting Europe is a shining example of anything. I am suggesting that there are cases where VAT can work in conjunction with low personal income tax and low corporate tax. Whether that's a good way of doing things or not is a choice of the population that pays these taxes, obviously.
Ireland, 4 Nov 2011: http://www.irishcentral.com/news/Un...as-100-people-per-day-emigrate-133226713.html
What I meant was Ireland financed it's ultra-low tax structure with unsustainable deficits. Which are still ~10% of GDP. So even though the VAT replaced their personal tax rate, they haven't balanced their books. Not exactly a success?
Maybe it can, but Ireland certainly isn't a good example. Their deficit is 10% of GDP ! I don't like the VAT on paper, because it's a flow-through. Taxing taxes. The problem is spending, not revenue. Then, there's the whole slippery slope argument which is what I meant in regards to Europe. Europe continually jacked the VAT while jacking just about every other tax they had (Corporate, Personal, Fuel etc). In a world devoid of people, taxes would be harmless. It's the people that make them dangerous Just say 'no' to taxes?
Sure, and now they're paying for it, by increasing VAT (among other things). Countries like the US are running large deficits even now and that's w/o VAT. A country like Norway is in surplus, with an extemely low debt load, and yet it has VAT. Then there's Poland, South Korea and New Zealand, which are kinda like Ireland (low personal/corp tax, reasonably high VAT). My point is that the presence of VAT doesn't necessarily mean fiscal issues and an impossible overall tax burden.
Ireland is a reasonably good example, because their recent deficits have been caused by their banking system and by the Euro, rather than by their tax policies. Again, US and the UK are running similar deficits and are doing nothing about them. While I agree spending is a problem, that's a completely different issue. All I am saying is that there's nothing wrong with VAT. In fact, the idea of taxing consumption (which, indirectly, got us into this mess, as well as many others), while cutting taxes on investment, appeals to me on all sorts of levels.
Sure. But it comes more down to the intent of lawmakers, than the actual tax structure. If bureaucrats intend to manage a VAT honestly, they will. If they intend to manage it aggressively, they will. That's why I don't support it. There's no tax a bureaucrat doesn't like. Over here, as well in Europe. Now is not the time to give these people more toys to ruin the economy with.