Income Tax and Value Added Tax

gracer

New member
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?
 

TopLink

Forum Founder
Staff member
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.
 

Corzhens

Member
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.
 

Lindsay

New member
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.
 

pwarbi

New member
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.
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.
 

to7update

New member
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.
 

Jazmine

New member
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.
 

rz3300

New member
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.
 

tpicks

New member
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.
 

Alexandoy

New member
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.
 

David15

New member
Re: Income Tax and Value Added Tax

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.
 

pramod

New member
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.
 

luri

New member
Re: Income Tax and Value Added Tax

When VAT was introduced in my home country, there was a lot of concern over impact on sales and financial burden on the sellers. However, a person who buys things is the person why pays the VAT. When he buys, VAT is included in the price. The seller than pays back the VAT collection to the revenue collection department. IN the beginning VAT had an impact on sales, but years later people seem comfortable with it.
 

Lindsay

New member
Re: Income Tax and Value Added Tax

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.
We already had Purchase Tax, which VAT replaced. Purchase Tax had some very odd loopholes, like the kit car industry: cars had a high levy, but car parts didn't. So customers bought all the parts for a car and built it. In practice it just created a cottage industry with some garages taking cash to build the kits for people.

I think the problem with VAT is that it is virtually impossible to lower the VAT rate. If they could start balancing the rates to stimulate certain industries it would be seen as less of a problem.
 

luri

New member
Re: Income Tax and Value Added Tax

In our country we don't have to pay income tax for the first 300,000 rupees we make in a year (the sum is more if you are married or have children). If you earn more than that, you will have to pay income tax. Income tax is the tax that you pay on your earnings.
value added tax is the tax that you pay for the things you buy. The price of every commodities comes with VAT added. You as a consumer will have to pay VAT for everything you buy.
 

harijobs

New member
Re: Income Tax and Value Added Tax

Just yesterday GST has come into effect in my country and when we compared the before and after tax values, after the introduction of GST the tax values seems like increased and for some products, they have hiked it so much that people are complaining about buying them. We know that government uses our tax money to serve us but I don't think we are served in a legit way. It is the people who suffer whenever the government does some changes in the name of welfare of the people.
 

luri

New member
Re: Income Tax and Value Added Tax

When VAT was introduced in my home country, business owners opposed the idea. They even went on a strike. However, the government was determined to implement VAT. When VAT was finally implemented, the business owners were mum because it was the customers who had to pay the VAT, not the business owners. When customers bought an item, the price included VAT. Initially, 10 percent VAT was implemented, now it is 13 percent.
 

Ray1

New member
Re: Income Tax and Value Added Tax

We have been brought under VAT recently in India with different rates on different categories but in most cases 18% on most. In my present location in Australia I am used to it and that is not a problem at 10% on most items. I have not yet paid VAT in India as it was introduced recently and still being debated largely by opposition parties. I believe we really needed it in India as we had different rates of taxes in different states and therefore paying different prices for the same items. However, paying 18% or more on other categories is a bit of a harsh decision which will raise prices of most items.
 

Jazmine

New member
Re: Income Tax and Value Added Tax

Our Senate is currently reviewing important provisions of the proposed tax reform law. While it ostensibly provides relief (not really much if you know how to do taxes) to lower income earners (minimum wage earners are exempt from income tax), the proposed tax reform law is nothing but a measure to for the government collect more money. There are at least two provisions that will hurt low income earners who are already struggling. One is the imposition of 12% VAT on socialized and economic housing as well as on low cost real estate rentals. Another is the imposition of excise tax on fuel products which is already subject to VAT.

There is already a backlog in housing and the passing of the law will mean that housing will even become more out-of-reach of ordinary people. That is huge! House and lot packages are already beyond the reach of many people without the VAT being added. Real estate developers have stated that they will slow down construction leading to loss of jobs for many people.

Fuel prices are already rising because of the weak exchange rate and if they add an excise tax on top of the VAT, it will not hurt the rich, but the poor who rely on public transportation. Public transport companies will have no option but to raise their fare to cope with fuel price increases.

In the future, people will just choose to squat and seize houses (like one group did) instead of working hard to buy their own. Many recipients of support vouchers from the government are in a much better financial position than those who are working hard and barely earning minimum wage. Squatters get low cost housing and allowance, the minimum wage earners don't. Now, they have to swallow VAT if they want to buy a home they can call their own.
 

rz3300

New member
Re: Income Tax and Value Added Tax

Well everyone certainly loves taxes, but they are an important tool that we should all probably understand more. I myself do not really know all that much about the different levels of taxation, which makes me a little worried now and maybe I should go do a lttle homework myself.
 
Top