[toyg]

> It seems like this is actually a step in the proper direction.

No. A step in the proper direction would be admitting that VAT is a regressive hidden tax on employees, and abolish it or replace it with more transparent taxation of real wealth.

Until that happens, we're all just jumping through hoops so that European politicians can tax the working man while hiding behind meaningless "consumption" codewords.

[fulafel]

Many essentials like food and bus tickets have lowered (or zero) tax rates, and it's printed on every receipt you get. Not really regressive or hidden.

Taxing wealth has big problems with transparency and evasion.

Progressive taxation is not a means to an end, just one mechanism to implement income redistribution. See eg basic income proposals with flat income tax.

But a worrying trend in EU lately has been to cut payroll taxes and raise VAT and other consumption taxes without compensating them in transfers, a combination which does hurt income equality.

[toyg]

> Many essentials like food and bus tickets have lowered (or zero) tax rates

That's charity, not progressive taxation. Besides, VAT is fixed-rate, which makes it regressive in practice.

> it's printed on every receipt you get

But nobody is taught how it works, in school or elsewhere, and unless you run your own business you'll never find out. Also, because it's segmented, atomic changes to different segments are usually reported under "business news" (unless it's for stuff like petrol and tobacco), the sort of thing most readers will skip. Honestly, the more you look into VAT, the more you see how it's always been used to raise taxes on employees without making them aware.

> Taxing wealth has big problems with transparency and evasion

Preying on the weak is obviously easier, that's always been the case. It doesn't make it right.

> a combination which does hurt income equality.

Amen.

[iopq]

It's not possible to tax wealth. Unless you want to tell me how many Bitcoins I own.

[toyg]

I'm a State actor. I can hire detectives that will go through the blockchain and monitor your traffic, and I'll likely get a fair approximation of how many bitcoins you have. Or you can just tell me when asked, as a good law-obeying citizen should do.

This is how all tax works, btw. Income tax is nothing but a wealth tax limited to wealth accumulated over a certain period. There is nothing impossible about it.

[iopq]

What traffic? They're stored on my hard drive. I don't fire up the client. I don't buy things with them. I just sit on them.

[toyg]

Ok, I'll make it easy then and just sequester your hard drive. Oh, it's encrypted and you won't give me the key? I'll throw you in jail.

[joosters]

How is VAT regressive or hidden? For a start, I'd say that just about every EU citizen is aware of it. Plus, prices in shops have to show VAT-inclusive prices to end customers, unlike some states in the USA where sales taxes can get magically added on to the final bill.

Secondly, it's not regressive because the more goods and services you buy, the more you get taxed. If I buy a luxury yacht, I'll end up paying more VAT than someone buying a toy boat. Same tax rate despite the increased bill.

Now, rich individuals may well try out all kinds of tax avoidance schemes but that's not a problem specific to VAT...

[djrogers]

I'd argue that showing pre-tax prices and charging tax at checkout makes the tax burden much more obvious to most consumers. Showing only the post-tax price on the tag hides the proportions of the tax vs item cost.

[mastef]

I was super-annoyed when first time in USA to find out I had to pay more at the cashier. Also it makes products seem cheaper than they really are - it's a cop-out to display pre-tax prices if you're billing more at the counter.

Are people shopping with a calculator?

[mbesto]

At the end of the year why does it matter what my VAT burden is anyway? As long as I have enough cash in the bank to pay for the things I need, and my bank account isn't negative at the end of the year, then I'm fine right? What behaviors are you trying to support?

[reitanqild]

Obviously. It also means you can't just sum together the prices of the stuff to get the total. It annoys me seriously every time.

[toyg]

> For a start, I'd say that just about every EU citizen is aware of it.

They know it exists, they don't know how it works or why (unless they run a business).

> Plus, prices in shops have to show VAT-inclusive prices to end customers

... which is exactly what I mean by "hiding it". You'll hardly ever see "€ 4.00 + € 1.00 vat" when going through shelves; you'll always see "€ 5.00". You have no idea how that price is calculated, what is tax and what is not, until after you've paid -- and even then you'll see an aggregated total, so if your basket included stuff that was taxed in different ways, you'll likely never know. Which nobody cares about, because we don't know how VAT works, for us it's just a random pricing element like the cost of materials. Except it's not: when it's said and done, it's a tax on fixed-income employees who can't justify a VAT return.

The american approach to sales tax, which seems complicated and "magic" at first, is actually much more transparent.

> Secondly, it's not regressive because the more goods and services you buy, the more you get taxed.

Nope. It's regressive because it's flat rate. A millionaire buying a dishwasher will pay the same amount of tax as a regular joe buying the same dishwasher, in practice penalising the poorest of the two. That's the definition of regressive taxation.

The theoretical notion that this is evened out by millionaires buying dozens of dishwashers versus joe's single one, is just that: theoretical. In practice, it does not happen: consumption levels are basically the same across most of the population.

> If I buy a luxury yacht, I'll end up paying more VAT than someone buying a toy boat.

If you buy a luxury yacht, it's likely not owned by you; it's owned by You™ Ltd, and filed as asset for this or that reason. You™ Ltd will diligently file its VAT forms, of course, and in the end it will get that VAT money back. Of course there are rules and enforcement etc etc, but in practice that's how it works for everything but the most outrageous items.

> rich individuals may well try out all kinds of tax avoidance schemes but that's not a problem specific to VAT

No, but VAT makes it trivial to game the system in practice, which is why businesses are fine with it. Note how there are constant attempts at abolishing "pesky" laws like inheritance tax or stamp duty, which touch very few individuals but are hard to game; whereas VAT involves everything and everyone but it's just accepted as part and parcel of doing business, because in the end it's paid only by fixed-income n00b employees who can't justify a VAT return.

[joosters]

They know it exists, they don't know how it works or why (unless they run a business).

What? It's just a percentage. You don't need to be a business to understand that.

...which is exactly what I mean by "hiding it". [...]

That's not hiding it. Companies can (broadly speaking) also show ex-VAT prices, should they choose, they are just obliged to show the inc-VAT ones more prominently. People care about the end cost, I'd guess if you polled people, they'd overwhelmingly choose the inc-VAT display over ex-VAT.

Also, in the UK, your receipt will show the breakdown of tax and may also highlight tax-exempt items, so if you really care for the details, you can see them.

The american approach to sales tax, which seems complicated and "magic" at first, is actually much more transparent.

Again, I'd wager that the actual costs are the ones that consumers want to see, not the pre-tax prices. Do US customers really sum their trolley of goods in their heads and add on the exact tax % to know how much they are spending before they hit the tills? Which is more convenient?

Nope. It's regressive because it's flat rate

Um, I'd suggest that you look up the definition of a 'regressive tax', you appear confused. 'flat rate' or 'proportional tax' is _not_ regressive, again by the very definition!

[yacht ownership discussion snipped]

because in the end it's paid only by fixed-income n00b employees who can't justify a VAT return.

VAT return? End customers have no VAT to claim back. They are people that pay it! Now if you are running a business, and so have business purchases, then obviously you need to be aware of tax regulations. If you are a 'n00b' employee then you pay it.

[toyg]

> It's just a percentage. You don't need to be a business to understand that.

What you have to understand is the process to claim it back, i.e. the fact that businesses and business owners effectively don't pay it.

> the actual costs are the ones that consumers want to see

Of course, which is why VAT is so clever: effectively, it's so easy to ignore that most people do just that and don't realise that they're paying a tax that businesses and rich people simply don't pay. It's the best type of hiding: in plain sight.

The American approach is more annoying, yes, but it's also more transparent: the consumer is forced to feel the full weight of tax, and can perceive how businesses are completely unaffected by it.

> 'flat rate' or 'proportional tax' is _not_ regressive

In practice, it is. If I pay the exact absolute amount of tax on a transaction for the same good, regardless of my wealth, then in practice it's regressive because it will weight more on the less wealthy. A flat rate is less regressive when transactions differ (the same percentage of a bigger transaction will result in more tax), but this is not the case with VAT. As I said, the theory that this is compensated by rich people buying more expensive goods is just that, a theory; in practice, this does not happen n any significant scale.

> End customers have no VAT to claim back. [...] Now if you are running a business

Of course. My point is, most wealthy people will be running businesses, and hence will not pay tax on pretty much anything except the most outrageous items. Most of those Porsches and BMWs you see on the streets of London are not bought by individuals, but rather by (shell) companies such people run. They're still managed exactly like they were an individual's private property, but on paper they're not and so there won't be any VAT paid by such "end customers".

> If you are a 'n00b' employee then you pay it.

yup. And that's my point: it's a tax on n00b employees who cannot afford good accountants and shell companies. They're the only ones who really pay it all.

[dagw]

if you are running a business, and so have business purchases, then obviously you need to be aware of tax regulations.

It's very common among people who have their own company to buy things like TVs and computers as business purchases and then just kind of end up keeping them in their living room.

[humanrebar]

If you're worried about regressive taxation, offset it with standard deductions, minimum income, or earned income tax credits. Distorting tax codes to accommodate social goals creates information disparities and, indirectly, justice issues.

It's like the discussions people have around here about how keeping salaries secret only helps employers. Keeping tax codes byzantine is good for corrupt politicians and special interest groups.

[mastef]

With 'step in the proper direction' I was referring to the table showcasing how calculations from 2014 to 2015 are now even further simplified.

VAT in itself is another debate. However, as many others have commented on this in this thread already, I don't have to go into specifics too much.

[tormeh]

VAT is pretty dumb, but at least now it's applied fairly.

[zo1]

>"[...] would be admitting that VAT is a regressive hidden tax on employees"

Could you elaborate a little more on that? I'm curious of your reasoning.

[bad_user]

Also, the higher the VAT, the higher the tax evasion in those countries. One reason this happens is because many businesses are at the limit of survival and cannot afford to pay.

One would think that somebody would get a clue that reducing the VAT would make it more affordable to more companies, but unfortunately law makers are clueless.

[tormeh]

That's not really how it works. Tax rate and tax evasion aren't really linked. It's about culture and enforcement.

Anyway, if your business can't pay tax it should close and you should find something more profitable to do. I guess you can argue that some businesses of cultural or otherwise non-monetary worth should have some subsidies, but as long as the company goal is to "bring in the dough", then that's the dumbest excuse I've heard. On par with "just because".

[bad_user]

> Tax rate and tax evasion aren't really linked. It's about culture and enforcement

And how does that culture happen? Do you think people just get up one morning and decide to do tax evasion?

Of course they are linked - especially in countries in which the private sector is underrepresented and overwhelmed compared to the retired, the unemployed and the ones in the public sector, all of them assisted socially.

In a country in which 60-70% of a company's revenue goes to taxes, such that the government can deliver their electoral alms, it's not so much about bringing in the dough, but more about surviving for one more year with food on the table.

[tormeh]

>And how does that culture happen? Do you think people just get up one morning and decide to do tax evasion?

No, they get brought up by their parents to do it, usually. The justification is that the government will just waste it anyway, which can be true. Of course, the culture that breeds tax evasion is the same one that breeds poor government. Happily I don't have to deal with it.

[laurencerowe]

The correlation is almost the exact opposite: https://ideas.repec.org/p/ces/ceswps/_431.html

It's cultural, tax evasion is higher in countries which were recently dicatatorships (Spain, Portugal, Greece) or never developed a strong central government (Italy.)

[refurb]

Tax rate and tax evasion aren't really linked.

Do you have any sources that support that assertion? Increasing tax rates increase the incentive to avoid said taxes. If I'm going to go to jail for tax fraud, I'm not going to that if the rate is 2%, but I might if it's 50%.

[Someone]

I don't have sources, but I do think it depends a lot on culture. For example, in Europe (WARNING: sweeping generalizations ahead) the northern countries do not have lower taxation rates than the southern ones, but shadow economies are smaller.

Part of that is that many people in the north consider a welfare state (http://en.m.wikipedia.org/wiki/Welfare_state) worth paying higher taxes for. "I'm a happy taxpayer" is not an unheard of statement, and said without a grain of irony.

Another part is that it is harder to evade taxes in a culture where people are more honest. If the typical accountant complains if you have money you cannot account for, and cannot be bribed, it is more of a hassle to find one that complies with you (conversely, if your accountant suggests ways to evade taxes, more people will be inclined to do it)

Historically, many consider that culture to be the result of Protestantism. Many Protestants consider democratic government to be the will of god (http://en.m.wikipedia.org/wiki/Protestant_culture#Government). That makes any form of revolt against government a sin.

[Luc]

Companies don't pay VAT.

[toyg]

I think parent is referring to the classic "VAT advance": in most countries, after a business registers for VAT, after 12 to 24 months the State will calculate your "expected VAT turnout" for the following 1 or 2 years, and demand advance payment. This is because some 80% of businesses don't survive the first 24 months anyway, so the State tries to collect every penny before they go bust. Ironically, that advance payment (which is invariably too high) is often a nail in the coffin...

[laurencerowe]

That sounds nuts, but it's nothing like how the system works in the UK. As a small business you complete your VAT return and pay your balance at the end of each quarter. A large business (turnover > £2M) will make payments on account more frequently so they don't get to keep hold of the VAT that has been paid to them as long.

[toyg]

I believe it often happens here in the UK as well, although it does not involve 100% of businesses like in some other countries. It's also a one-off, whereas elsewhere it can, in some circumstances, become a recurring request.

[laurencerowe]

Can you point me to any examples? I ran a small business in the UK for several years and never heard of anything like it. The closest would be the Windfall Tax, but that targeted a small number of privatised utilities that were sold off on the cheap by a previous government. http://en.wikipedia.org/wiki/Windfall_Tax_%28United_Kingdom%...

[tormeh]

They can take the customer's VAT payment and stuff it in their pocket, though. A win-win for everyone except everyone who's not that business.