Many EU countries have a “VAT” and like feel like this is kinda targeting poor people. Like, for the rich, this is insignificant, for poorer people, a (example) 20% tax would be a huge burden. Why do they do this?
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It’s regressive in the sense that poor people spend more of their money on goods and services that include VAT.
It’s also “broad based” in that wealthy people spend more money (in total) on things, and the vendors of those things collect the tax.
For example, if a company in Australia sells a $11m private jet to some asshole, that asshole just paid $1m in taxes.
Said asshole may well pay no income tax by virtue of their ability to disappear taxable income through complex business structures.
Just to make sure you know: Basically everyone has a VAT, except the US. It’s not some special EU thing.
We have it in Switzerland, Canada has it, Japan has it, China has it, India has it, Russia has it, Brazil has it, Indonesia has it, Australia has it, Ukraine has it, Mexico has it, South Africa has it… I’m stopping here, but every country I googled had it so far.
Doesn’t the US also have local taxes that are effectively the same as a VAT
You probably mean the sales taxes, those look similar from a consumer point of view, but they work differently.
In a VAT system the taxes are collected all along the value addition chain. Each sale of intermediary products has the VAT cost on it, but companies can claim the VAT that they pay for their inputs against the one they collected on their outputs. In effect each company hands over the part of VAT that is raised on their part of the value addition. In the end it all comes from the consumer who buys the final product but doesn’t sell anything onward so they can’t claim their paid VAT against anything. This system determines the end consumer automatically.
In a sales tax system, only the sale to the final end customer is taxed, and intermediary products are not taxed. Intermediary companies must prove to their suppliers that they are not end customers, that they intend to sell things onward, and that they are therefore exempted from sales tax and the supplier does not have to collect sales tax. If that fails, then that means mistakenly a company has to pay sales tax, and then their customer has to pay it again.
Other than that I don’t know enough to compare:
- What is more or less administrative overhead.
- What is more or less open to fraud.
- To what degree this is linked to the existence of a single national or many regional tax rates
We have taxes imposed by: -federal government -state government -county and city governments
Nothing will meaningfully improve until the rich fear for their lives
What do you mean “instead of”? There are many kinds of taxes in my country, which is in the EU. I pay a huge cut of my salary in taxes every month even before I pay VAT on things I buy.
VAT is a sales tax, not an income tax.
And yet the claim that it is regressive is accurate. It impacts those that have less wealth to a greater degree which makes it regressive.
How so? A poor person would buy less things, thus pay less VAT, than a rich person buying more things
They pay a larger percentage of their income in taxes
Depends on what is being paid, the VAT model being used, the country etc.
For instance in France the base tva is 20%, but food and hygiene products have a special status which reduces it to 5.5%
I forgot the exact details buI if I recall correctly in Germany they have two models A and B depending on the product, forgot the percentage though. And then if you’re buying something for work the percentage can change again.
Regardless how you frame a VAT it will always be regressive. That doesn’t mean they are bad. It just means it shouldnt be the primary source of revenue.
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Yes, you’re correct: Poorer people spend most of not all of their available on income on everyday goods like groceries, clothes, etc…
Richer people spend (relatively speaking!) less of their available income on these items and save me
It is, but it’s also a very efficient and difficult to evade tax. For many EU countries the VAT revenue is equal or larger than the income tax revenue.
Most Europeans don’t mind it. You can control your spending, so VAT doesn’t hit us in inconvenient ways, like for example, taxes on cars and property.
European countries compensate poor people with good social programs. So in the end, poor people are getting more benefits than the VAT they pay.
Essential goods have a 6% taxation in my country (Portugal). This also applies to the first 200kw/h you use in your home.
Then there is a 13% for services, like restaurants. I think wine is also taxed thia way.
The higher tier is reserved for non essential items, like cookies, chocolate, fuels (which are technically being double taxed), cars, etc.
We also pay a direct contribution for our social security system (11% over your gross salary, monthly), plus a direct taxation over our overall monthly salary (the minimum wage workers are exempt from this).
The discussiom on these taxes is long, old and boring but it essentially boils down to having those who want something, pay for it.
Your whole post can be summed up as “consumption taxes are regressive but some think they are more fair”
What is the alternative? Asking honestly.
More progressive income taxes like a land value tax would be a great start.
I pay those. I have a plot of land and pay tax on it.
Any other suggestion?
You almost certainly do not unless you are incredibly wealthy and own multiple plots of land . Land Value Taxes are not the same as property tax.
That’s correct. My country does not observe it.
Most countries do not have a LVT because it would hurt the very wealthy as it is taxes on unused land not on your primary home.
That tax is reduced for important goods in most countries, like with bread
All consumption taxes are regressive.
Fortunately they hit the rich harder than poor. Which means there’s more money for the social programs that keep those who are struggling alive
We have VAT in America. The States got pissy that we were buying things online and not paying sales tax. Now we have to pay VAT and sales tax because Google and such caved in to pressure, and the rich assholes still do whatever they want. Capitalism is hell and America is doomed.
Good luck y’all.
It’s just a different implementation of sales tax. Non-European countries in the Global North also have it, including the big one I shall not name, just sometimes under a different form and thus different name.
Because fuck the poor and working class. Don’t forget that they’re double dipping since income is often taken out of your earnings before you even get your money then every single purchase is taxed too.
Don’t forget that they’re double dipping since income is often taken out of your earnings before you even get your money then every single purchase is taxed too.
😭
Because fuck the poor and working class.
I thought EU was very progressive since they often have stuff (like healthcare) much better than the US. Is their “progressiveism” a myth? Am I over-estimating how progressive they are? 🤔
The EU is one of the most progressive regions on Earth, if not the most. That said they’re definitely nowhere close to perfect, as seen from the encrypted messaging fiasco.
There’s another factor that nobody mentioned: the sales tax in EU countries is different for different products. This allows countries to incentive or disincentivize different classes of products by ramping the sales tax up or down. Higher tax on junk food, cigarettes and/or alcohol, low or nonexistent sales tax for basic ingredients and medicine.
Interestingly, France and the Czech republic tax wine and beer respectively like basic food.
How the fuck you think they pay for healthcare and social programs?
Taxing at point of sale is a weird way to do it.
A better way (in my opinion) is by income, the higher, the higher your tax rate.
A VAT is essentially like a “flat tax” rate, that some politicians in the US are proposing.
Depends how you look at it. Out of my wage, I lose ~50% after taxes and the healthcare system’s “fair share” and, depending on the country, the health system is so under-funded anyway that there’s a heavy incentive to give in and pay private if you want certain operations or some such done anytime in the foreseeable future.
In what way does VAT hurt the poor more than the rich? Considering it’s on each item you buy it clearly impacts the rich more than the poor.
Because VAT is proportional to the item, not the person’s income. From one perspective, yes it’s a fair system but from another, the cost of living is significantly greater for a poor person than a wealthy person. Many are barely scraping by while others are out wining and dining and still getting plenty for free.
Here in the Uk we have tax for services (council tax), tax for health care (national insurance), tax for all your income (income tax) and almost everything you buy includes a small tax called VAT (value added tax) which is about 20%. There’s also a few taxes on cigs, alcohol and petrol.
VAT not on food, books but it on basically everything else. The more things you buy, the more tax you’ve paid. You more yoy spend on items the more you pay.
I don’t know why people are calling it a tax on the poor. It’s obviously a tax on the biggest consumers.
Yes, you’re correct: Poorer people spend most of not all of their available on income on everyday goods like groceries, clothes, etc…
Richer people spend (relatively speaking!) less of their available income on these items and save me
The rich don’t have to pay taxes. The taxes they pay are largely voluntary.
That is the way of the world. It’s a truism. That’s what happens. You cannot change it.
Bonus extra: the trickle-down theory almost entirely doesn’t exist either. BUT the second generation - the grandchildren - after the original rich person will usually piss almost all of the fortune away.
Second bonus extra: the same thing happened with serious socialism; the leaders become dictators.
Anarchy for the win. 😁
