Mohit Sareen's List: What is VAT & Sales Tax ?

• Most sales taxes are collected by the seller, who pays the tax over to the government which charges the tax
• Sales taxes are considered to be regressive tax; that is, low income people tend to spend a greater percentage of their income in taxable sales (using a cross section time-frame) than higher income people.
• If all purchases are subject to the same tax rate, the tax rate itself is flat with those who consume more paying more in taxes.
• exempt from sales tax to alleviate the burden on the poor.

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• goods and services tax (GST)
• VAT is neutral with respect to the number of passages that there are between the producer and the final consumer; where sales tax is levied on total value at each stage, the result is a cascade (downstream taxes levied on upstream taxes).
• By definition, exports are consumed abroad and are usually not subject to VAT
• A VAT is an indirect tax, in that the tax is collected from someone who does not bear the entire cost of the tax.
• In France, i
• approximately 45% of state revenues.
• VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling.
• Value added taxation avoids the cascade effect of sales tax by only taxing the value added at each stage of production. V
• production and distribution of goods
• alue added to goods in each business transaction
• In many developing countries such as India
• sales tax/VAT are a key revenue source
• sub-national governments as it leads to an overall reduction in the revenue they collect as well as a loss of some autonomy.
• The main difference is the extra accounting required by those in the middle of the supply chain;
• On the other hand, total VAT rates can rise above 10% without widespread evasion because of the novel collection mechanism.
• The standard way to implement a VAT is to say a business owes some percentage on the price of the product minus all taxes previously paid on the good.
• The "value added tax" has been criticized as the burden of it relies on personal end-consumers of products and is therefore a regressive tax (the poor pay more, in comparison, than the rich).
• they are difficult and costly to administer and collec
• VAT has essentially replaced lost tariff revenues
• value added taxes are far more efficient.
• a carpenter may offer to provide services for cash (i.e. without a receipt, and without VAT) to a homeowner, who usually cannot claim input VAT back.
• (lumber, paint, gasoline, tools, etc) sold to the carpenter, who would be unable to reclaim the VAT on these inputs
• , postal services, medical care, lending, insurance, betting)
• hat makes Denmark one of the countries with the highest value added tax, alongside Norway and Sweden. A number of services are not taxable, for instance public transportation of private persons, health care services, publishing newspapers, rent of premises (the lessor can, though, voluntarily register as VAT payer, except for residential premises), travel agency operations.
• In India, VAT replaced sales tax on 1 April 2005
• used a form of VAT known as the "Single Business Tax" (SBT

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• The simplest missing trader fraud is where a fraudster imports some goods, and then sells them. When he sells them, he charges the price of the goods, plus VAT. He then absconds with the VAT instead of paying it to the Government. This situation, where the goods are made available for consumers in the importer's home market is often known as 'acquisition fraud'.

• It is assumed that due to cross-checking in a  multi-staged tax, tax evasion will be checked, resulting in higher  revenues to the government.
• the first seller pays the first point  tax, and the next seller pays tax only on the value-addition done -  leading to a total tax burden exactly equal to the last point tax.