When taxes such as excise taxes and indirect taxes such as VAT are placed by the government, the government takes into account the price elasticity of demand of a product and the response of the consumer if price were to rise. The tax burden depends on the price elasticity of demand to establish of whom is to take majority of the burden. When price elasticity of demand is inelastic, the consumer will take majority of the tax burden. Tax incidence falls on the group that responds the least to price and has the most inelastic curve. The tax burden can possibly be split evenly between producer and consumer, by the decision of the producer.
Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT on the materials and services that they buy to make further supplies or services directly or indirectly sold to end-users. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling. It has been criticized on the grounds that (like other consumption taxes) it is a regressive tax. Comparison with a Sales Tax Value added taxation avoids the cascade effect of sales tax by only taxing the value added at each stage of production.
Differences between the proposed GST and VAT are not great but there are some significant differences. If and when the GST becomes a reality a range of taxes including wholesale sales tax and provisional tax will disappear when the GST appears. Daily consumables and services will rise as a result of the GST. The government is promising to balance the tax by creating household savings through lower marginal tax rates. The question is, will this be sufficient compensation?
Case in point, it can be said that while acquiring products from a retail shop, the retail deals tax is really paid by the clients. The retailer inevitably passes this duty to the particular power. The circuitous tax, really raises the cost of a decent and the clients buy by paying more for that item. Importance of Indirect Taxes:
So under such a standard, no specific revenue for transactions and industry will exist. The specific revenue recognition will be replaced with a principle founded approach for determining revenue recognition. This new standard by the IASB could influence every entity’s daily accounting as well as the manner business is conducted in contracts with clients and/or customers. The standard would make it totally apparent when revenue is recognized and why (Journal of Accountancy July 24, 2010). The main aim of the proposed standard is that a company should recognize revenue when it transfers goods or services to a customer in the amount of consideration the company expects to receive from the customer or client (Journal of Accountancy July 24, 2010).
A National Sales Tax would require them to pay more out of pocket towards food or services, reducing their monthly income. However, the National Sales Tax could reverse this problem by enticing individuals and families to consume less This will allow them to not only build savings but also lower the cost of goods and services because there will be less of a demand for them. The individuals of the United States will ultimately benefit from a decrease in the cost of goods and services regardless of their income status. In conclusion, there have been many arguments about the effects of a National Sales Tax. Those who oppose it say that it is too risky, causing harm the economy, significant job-loss and burden those that cannot afford necessities.
I. You might have heard politicians in the news, talk about overhauling our tax system with a new fix-all idea, the flat-tax. This would simplify our overly complicated tax system and might seem appealing at first glance, however there are serious problems with it. II. Implementing a flat tax without significantly increasing the deficit is impossible without shifting the burden from the rich to the middle-class, instead our current progressive tax policy needs to be changed so that it is simpler and does not allow corporations to abuse the tax loopholes.
A good understanding of labor supply reactions to tax and transfer policies is necessary for achieving related policy goals. Income support programs intend to alleviate poverty and create a more equitable society. However, the reaction of the labor supply can derail the intended results and need to be carefully evaluated for effective policy. Economic theory suggests that as taxes and transfer payments increase, the amount of hours and/or number of employees will decrease (Borjas 2005). The exception is transfer payments with work requirements, where the labor supply moves in the same direction as benefits.
Business transactions which are subject to GST are called taxable supplies. Businesses making taxable supplies are required to register under GST if the annual sales turnover has exceeded the prescribed threshold. There is an important clue in this tax paying process which is only a registered person can charge and collect GST on the taxable supplies of goods and services made by the producers. GST is charged subjected to the goods or services sold. Once you are registered for GST, GST must be charged whenever you make taxable supplies.
However, with gasoline, forecasting consumption is difficult because you do not know when the price will change, when the consumers will resort to use a substitute product or when the supply will go down. This presents the government with financial planning challenges which can be easily eradicated with a more certain taxation system such as the income tax. Government planning is very crucial when it comes to economic and social development. Inadequate planning can have serious economic effects on the society. Therefore, with the new system in place we not only face a taxation challenge but also an uncertain economic ... ... middle of paper ... ... of wealth, the current tax system is fair.