Advantages Of Value Added Tax

Clayton Smith

000-07-2353

Economics 211

Dale McHardy

11/23/14

The Economic Effects of The Value Added Tax System

Introduction

The Original Value Added Tax was formulated by a French economist over half a century ago in 1954. It was put into effect for the first time on April 10, 1954 by Maurice Laure, the former joint director of tax authority of France. The value added tax system has been a great success from its conception. The Value Added Tax, or VAT as described by the European Union is a general, broadly based consumption tax calculated on the value added to goods and services throughout the various stages of its production. Value Added Tax can also apply more or less to all goods and services that are bought and

Additionally, The VAT, because it is simultaneously a consumption tax, provides an extra incentive for the population to limit extraneous spending. As in the case of the Fair Tax, if you spend less than you make, you will also pay less in taxes. However, unlike Fair tax deployment of the VAT Tax has shown itself to be successful in other countries. VAT is very popular in Europe, and has served to help unite the countries of the EU. Britain also employs a value added tax, as do many countries representing other continents. Another pro of the VAT system is its ability to collect more revenue than most other forms of taxation. This is largely because everyone is taxed at every transaction. The VAT is able to capture more revenue that may be missed by another Tax system such as sales

The overall tax base against which revenue is raised in the Bahamas is expected to be smaller when compared to other nations which have a VAT as well as taxes on income. The proposed rate of the VAT in The Bahamas will be the same as in most other Caribbean countries. With the expected lowering of the rates of import duties, a VAT at the standard 15 percent rate will only serve its revenue generating objectives if discipline is exercised to maintain its original tax