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Thread: Income Tax and Value Added Tax

  1. #1
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    Default Income Tax and Value Added Tax

    Unlike in the U.S., Value Added Tax (VAT) is my the government in my country's way of taxing people's consumerism. The long time percentage of VAT here has been 12% but our president has proposed to increase it to 15%, while adjusting income taxes according to monthly income.

    While the income tax reform is good news for people who pay the same percentage of taxes no matter how much the income, the increase in VAT could either be good or bad news. If I try to analyze, big businesses which make millions will be required to pay a bigger tax percentage than lower income classes. To add to this, there's also a possibility of decrease in consumerism due to an increase in VAT. So big businesses have the possibility of losing more in this kind of process which could also lead to laying off of employees who are also part of the consumer group. In return, if there's less consumerism, the demand for products will decrease and this will put great impact on businesses concerning supply.

    How do you think are supply chains affected by these kind of changes in taxes?

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    Forum Founder & Owner TopLink's Avatar
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    Default Re: Income Tax and Value Added Tax

    When VAT was introduced in the UK there was a lot of concern about the impact on sales. Same when the GST came into Australia. I'm not sure it had that much impact to be honest.
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    Top Link - Site Owner

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    Diamond Member Corzhens's Avatar
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    Default Re: Income Tax and Value Added Tax

    Tax is like death, the only 2 things that we cannot escape from. With an increased VAT, the industry can feel it at first but there will be a period of adjustment and then it will stabilize. The computation of the VAT has a redeeming factor in such the outgoing VAT is deducted from the incoming VAT in terms of taxation. It means that the cargo you received from your supplier was already taxed so it should not be taxed again when you sell it. Therefore the VAT directly affects the consumers because the consumer is the end of the line of the supply chain. And in fairness to the government, it can earn a lot from the added VAT rate.

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    Default Re: Income Tax and Value Added Tax

    I always found the problem with VAT was the admin overhead. Collecting all the receipts and processing it was always a pain, and takes a few days each quarter. If there was any way to simplify the system, I'd definitely approve!

    The local tax office kept trying to push us to paying the flat rate (over here you can pay a flat percentage of revenue instead of calculating the actual tax owed). The problem is that we always owed less than half what the flat rate bill would have been, and doubling the tax bill would have wiped us out.

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    Default Re: Income Tax and Value Added Tax

    Quote Originally Posted by TopLink View Post
    When VAT was introduced in the UK there was a lot of concern about the impact on sales. Same when the GST came into Australia. I'm not sure it had that much impact to be honest.
    Whenever something new is introduced, there is always horror stories about what it's going to do and how we are all going to suffer because of it but it very rarely comes to fruition. If VAT hadn't been introduced over here in the UK, then the government would have found a different way of doing things so like others have said, it was inevitable that we would have had to pay some sort of tax so like it or not, it's become just a fact of life.

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    Default Re: Income Tax and Value Added Tax

    Taxes are part of history and are pretty much inevitable, so as far as I see it two things are very important in what concerns existing and new taxes. One, abundant information on the tax will work is necessary. Second, what benefit we will receive from that contribution. Giving is ok, but we should get something in return too.

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    Default Re: Income Tax and Value Added Tax

    VAT is a tax on consumption and it has been the government's way of collecting taxes from end consumers. A business will typically only pay VAT for their net profit margin (assuming all purchases are eligible for VAT credit) while a regular consumer will bear the full force of the tax on top of the taxes levied on their income. Increasing the VAT by 3% will mean the increase in cost of almost everything: electricity, utilities, fuel, oil, grocery items, spare parts, fare, school, books, office supplies, restaurant food. I think it will make life harder for the poverty-stricken sector as they don't stand to benefit from the income tax rate adjustments yet they will have to pay the full VAT amount. I think it will dampen the consumers' enthusiasm for spending on non-essential items but the effect will be minimal as many people are used to bearing and grinding tax increases.

  10. #8
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    Default Re: Income Tax and Value Added Tax

    I have always some difficulties with understand taxes and tax policy. I understand the basics and all of that, but when you start getting to the obscure ones, and I would put value added in that category, you tend to lose me.

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    Default Re: Income Tax and Value Added Tax

    What I can understand about direct tax and value added tax are, direct tax is like a amount of money deducted from the worker's earning as a tax. While value added tax is one arising from purchase of goods and service which could be added to the price of the item, it's like an indirect tax I think.

  12. #10
    Silver Member Alexandoy's Avatar
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    Default Re: Income Tax and Value Added Tax

    Let me share what I know about taxes. The Value Added Tax is a levy on our purchases. So if we buy more then we pay more taxes. The Income Tax is the tax paid by a person who earns money hence the name of the tax. The direct tax is also called Excise Tax which is levied on a particular item. Like the cigarettes and liquor in the Philippines, they are levied higher taxes thru excise tax which they like to call Sin Tax (because smoking and drinking are supposed to be sinful huh). Well, speaking taxes, we simply have to abide and live with it. What’s important is that we share in the funding of our government.

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