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Abolish VAT

Comment 6th July 2010

Replace the multi teared system of VAT by a single application of purchase tax to the end user.

In the present system:-

  • A company buys its plant and materials and pays VAT on sales and reclaims VAT on inputs. 
  • It sells its product and charges the wholesaler VAT and pays VAT for packing and transport and reclaims VAT it paid to the suppliers. 
  • The wholesaler charges VAT again to the retailer and reclaims the VAT on its inputs.  
  • Tthe retailer charges VAT to the consumer and reclaims the VAT it paid its suppliers.

All the layers of VAT require accounts and the VAT office has to supervise and check all these levels of accounting.

Why not replace all these multiple levels of accounting and checking by a single application of purchase tax at point of sale to consumers.  The Government receives the same amount of tax at a fraction of the administration cost and companies are relieved of the necessity to deal with a lot of unnecessary accounting.

Why does this matter?

  1. Reduce overheads for manufacturers and distributors.
  2. Reducing to a fraction the cost to the Government of collecting tax to a fraction of what it is now.

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