IIUC, sales tax is only taken by the retailer when an item is sold to a consumer, whereas VAT is skimmed off at every point in the supply chain. A 20% VAT is effectively the same as a 20% sales tax, except … if sales tax were 20% there would be a lot more tax evasion. - ThreadSky

ohnonotagain.bsky.social • 21 days ago

IIUC, sales tax is only taken by the retailer when an item is sold to a consumer, whereas VAT is skimmed off at every point in the supply chain.

A 20% VAT is effectively the same as a 20% sales tax, except … if sales tax were 20% there would be a lot more tax evasion.

Comments

paddingtonshort.bsky.social•21 days ago

Ah okay - so basically saved the hassle of reclaiming VAT

But essentially it’s the difference between the Gulf of Mexico/America !?

wanderlib.bsky.social•21 days ago

VAT requires higher state capacity to administer and is harder to dodge.

But otherwise, yeah, the difference is labeling.

daveon.bsky.social•21 days ago

With the added wrinkle that you can't cross charge your VAT receipts and sales taxes are different based on state and local things - even, sometimes down to sections inside cities.

But mostly the problem is if I pay $10 in sales tax, I can't take that off the sales tax I also collect.

stephenbmd.bsky.social•21 days ago

VAT is generally charged on services provided as well as goods. Sales tax is normally charged only on goods.

lifeisamazing.bsky.social•21 days ago

That's kind of true, except a vat registered buyer gets it rebated, so provided everyone in the supply chain is vatted, it's only the consumer that pays. Once vat is paid even by a non-vatted business, then VAT isn't charged again unless it re-enters the vat chain, so it's different in that way.

lifeisamazing.bsky.social•21 days ago

Also, if a VAT-registered business is the final consumer, they get the VAT back, so essentially no VAT is paid. Another scenario: I used to have books bound. I paid and recovered VAT on the service, but since books are zero-rated, the VAT just evaporated from the chain. A pointless exercise.

lifeisamazing.bsky.social•21 days ago

So in this way it's more complex than sales tax. But VAT is only actually net levied where it leaves the VATted supply chain.

ollybenson.uk•21 days ago

Technically true but in the UK the amount of tax you have to pay as a business is the VAT you have charged your customers minus the VAT that you have paid out. It's only end consumers who actually end up out of pocket.

torontomush.bsky.social•21 days ago

And much the same in Canada.

Comments

Posting Rules

Reply