John Hudson wrote:
For the end consumer, VAT is a sales / consumption tax. Much like the
GST [goods and services tax] here in Canada it is added on by the the
first producer in the chain. The wholesale pays the producer the
producer's gross amount plus the tax. The wholesaler sells to the
retailer and the retailer pays the wholesaler's exit price plus the tax
based on the wholesaler's exit price. Assuming the wholesaler's exit
price is greater than his input price from the producer the wholesaler
will have collected more in tax from the retailer than he paid to the
producer. The wholesaler remits the net difference to the tax
department. The retailer sells to the ultimate consumer plus tax. The
portion of the consumer's payment to the retailer comprising the tax is
set off by the amount of tax the retailer paid to the wholesaler and the
retailer remits the difference to the tax man. The only person who
cannot claim any of the tax back is the ultimate consumer. To the
consumer the tax is a sales or consumption tax. Down the chain back from
the original consumer the net effect of the tax is an incremental tax on
value added at each stage up the chain, hence the term "value added".=20
Voila ...... today's accounting and tax lesson!
>>Fair enough, everyone gets screwed, right? (Especially me!)
Andy Gilbert
Exeter
Devon
England
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