Fictitious names used in
this illustration.
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ZACME MOLDING
CO.
makes rubber
grommets
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Adds value to raw rubber, and VAT is applied.
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Zacme Molding sells
grommets to Shiny Parts, and the price of the
grommets includes the VAT levied on
Zacme.
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SHINY PARTS
CO.
makes metal
computer box
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Adds value to sheet metal, and VAT is applied.
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Shiny Parts sells metal
boxes with grommets in them to Bigtek Computers,
and the price of the metal box includes the cost of
VAT levied on Zacme and Shiny.
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BIGTEK COMPUTER
CO.
makes computer
assemblies
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Adds value to all those unassembled parts, VAT is applied.
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Bigtek Computers sells
computer assemblies to Fast Engines, and the price
of computer assemblies includes cost of VAT
paid by Zacme and Shiny and Bigtek, all the other parts suppliers for that box.
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FAST ENGINE
CO.
builds automobile
motors
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Fast Engines adds value to a wide variety of materials and VAT is applied.
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Fast Engines sells motors
to Awesome Cars, and the price of the motors
includes cost of VAT paid by Zacme and Shiny
and Bigtek and Fast Engines.
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AWESOME CAR
CO.
builds family
sedans
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VAT is applied to Awesome Cars.
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Finally.......
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When you buy a car, the
price includes the cost of VAT levied
on all the manufactures of all the parts in the
car.
YOU
PAY more VAT!
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Every part in any product you buy experiences a similar VAT burden.
And it's not just the VAT itself, it's also the cost of complying with the tax code, like extra employees to process it.
You pay the VAT levied on every company that makes a part in any product you buy.
No matter where you look, ALL taxes are paid ONLY by the the common citizen.
Your income taxes may be small compared to the taxes you pay when you buy stuff.
And if you buy a lot of stuff... well, you get the picture.
Current VAT proposals ADD VAT to current business income taxes.
Final Point: VAT administration requires a new VAT Authority, probably more intense than the IRS.
The point is, when a tax is levied against a corporation, that corporation just includes the cost of that tax (and the cost of complying with the tax laws) in the price of its product or service. So the customer pays the tax. This applies at any level, and flows all the way to the private citizen who ultimately pays all the taxes. Sometimes it's a long chain, but all the links are connected, and at the bottom of any product tax chain, is the private citizen. So, corporations collect taxes for the government, they don't pay taxes. It's just another way the government gets your money! The embedded cost of VAT expands the more complex the product is.
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