Tuesday, March 20, 2007

Value added tax, (VAT)

Transactions of goods and services have taxes imbedded within them. It’s generally uncertain as to how many levels of transactions goods or services have passed or been processed through or what are the total taxes imbedded within them. The EU has successfully implemented a form of sales tax described as “Value added Tax”, (VAT). Since each member nation is a sovereign nation, the economic concept of a European common market would have been less feasible without such a tax method.

Enterprises deduct all the VAT they paid from the VAT they collected, sending the paperwork and difference on to the government. Thus the compounding of the sales tax is prevented due to only carrying foward taxes on the additional value added due to handling or processing of goods and services. VAT is a simpler and more business friendly species of sales tax. Enterprises enjoy fast and complete rebate of all sales taxes they paid.

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