There is a great deal of buzz starting to generate around the “value-added tax” (or VAT). The concept of a VAT was first proposed by Wilhelm von Siemens, son of the founder of Siemens in 1918. The first country to implement a value-added tax was France in 1954. Today, nearly 100 countries have a VAT. The U.S., so far, is not among the list. But that may change soon.
Many experts are arriving at the conclusion that income tax increases and spending reductions alone will not be enough to bring the annual budget deficit to manageable levels. The solution being offered is the adoption of a value-added tax. The new 1099 filing requirements for 2012 (not to be confused with the 2011 1099 requirements) may be a first step towards adoption of a VAT. If it does happen, business owners need to get ready for a mountain of new tax compliance paperwork.
Exactly what is a value-added tax?
A VAT is similar to a sales tax with two important differences. First, sales taxes are charged by state governments (and in some cases by municipalities) and only impact transactions that occur within that state. A VAT is charged by the federal government and impacts transactions anywhere in the country.
Second, sales taxes are due and collected on goods and services when they are consumed. The cup of coffee you purchase at the corner deli requires that you (the consumer) pay a sales tax. The deli did not pay a sales tax on the disposable cup or on the beans used to brew your coffee. The deli was just a “middle man” from a sales tax perspective and exempt from the sales tax. With a VAT, every company that touches a product or service on the path from raw material to finished good must pay a value-added tax. The mechanics are a bit tricky.
See full article at: Is a Value-Added Tax Heading Our Way? : Money :: American Express OPEN Forum.
Related articles by Zemanta
- A VAT Made In America (wallstreetpit.com)
- Value-added tax (VAT) looms in our future (walletpop.com)
