The standard VAT in the U. There is no VAT on some items such as food and children's clothing. Financial and property transactions also are exempt. Those who favor value-added taxation argue that a VAT system discourages attempts to avoid taxes. The fact that VAT is charged and recorded at each stage of production rewards tax compliance and acts as a disincentive to operating in the underground market.
For manufacturers and suppliers to be credited for paying VAT on their inputs, they are responsible for collecting VAT on their outgo: the goods they create or sell. Retail businesses have an incentive to collect the tax from their customers since that is the only way for them to obtain credit for the VAT they had to pay in buying their goods wholesale. A VAT is also arguably better than so-called hidden taxes. These are the taxes that consumers pay without entirely being aware of them, such as taxes on gasoline and alcohol.
In the U. Because they are levied at the same percentage on many or most products and services, a VAT is seen as having less of an impact on individual economic decisions than an income tax. Still, it can register on a country's economy. A VAT is considered an effective way to improve the growth of a nation's gross domestic product GDP , raise tax revenues, and eliminate government budget deficits. Opponents of VAT argue that it unfairly burdens people with lower incomes.
Unlike a progressive income tax such as the U. In an attempt to reduce this income inequality, most countries that have VAT, including Canada and the U. Government of Canada. Income Tax. Small Business. Your Privacy Rights. To change or withdraw your consent choices for Investopedia.
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Your Money. Personal Finance. If it sets only a single rate of tax, that rate will then have to be precisely g. The gain to the poor from moving to a two-rate structure is thus g - s , where, as before, s , is the subsidy on good 1. Take the same illustrative numbers as at the end of Box 7. Assume in addition that the government must raise 20 percent of all income for general spending, and that the second rate increases administrative cost by 3 percent of income.
The largest possible gain to the poor from introducing a second rate is now about 38 percent of their income. In this sense, those costs are borne disproportionately by the poor rather than by, say, a 3 percent reduction in the net incomes of rich and poor alike.
The reason, intuitively, is that a government that seeks only to raise the incomes of the poor will always extract as much as possible from the rich in order to benefit the poor; if the amount that the government has to pay in administrative expenses increases, this can consequently be found only by reducing the subsidy—which bears more harshly on the poor than on the rich, since it is they whose expenditures are most concentrated on the subsidized good.
Thus, there appears to be a multiplier-like effect at work, with the administrative cost of multiple rate structures having a more than proportionate effect in reducing the redistributive potential of indirect taxation.
Support for setting only a single positive rate is based both on experience with the administrative and compliance difficulties associated with multiple rates and on the realization that the amount of redistribution that can be achieved through indirect taxation is inherently limited.
This position is matched by an increasing tendency for VATs to be introduced with only a single rate. The extent to which equity gains can be achieved by differential rates of VAT depends on the range of other instruments available.
A few excises on goods in inelastic demand may be able to reap the main efficiency gains from differentiation, so that the case for multiple rates of VAT is primarily an equity one. The equity case for differential VAT rates will be stronger the more restricted is the set of other tax-spending instruments available to government. It will be weaker, for instance, when an effective income tax is in place. But while the benefits from differential VAT rates may consequently be greater in developing countries, these are also the countries in which the problems of compliance and administration associated with a multiple rate structure will be greatest.
The standard advice to fully tax tourism appears to be widely ignored. It may have underestimated the optimal tax argument for a lower tax on services of a fairly non-unique kind. Effort might be better focused on securing some degree of coordination between competing countries.
The importance of the rate differentiation issue may in any event have been overstated. Even leaving aside non-VAT instruments, there are design features within the VAT itself other than the statutory rate structure that can be—and are—rightly or wrongly used to mitigate the distributional effects of the tax. The widespread use of exemptions, for instance, discussed in the next chapter, means that even a VAT that has only a single statutory rate will have many effective tax rates, some of which such as those associated with the exemption of basic foodstuffs, health, and education services may have significant equity effects.
A high threshold can have similar effects. Adams , Thomas S. Atkinson , Anthony B. Auerbach , Alan , and L. Aujean , M. Ballard , Charles L. Boskin New York and London : Blackwell. Bird , Richard, M. Bird , Richard M. Atkinson and F. Bourguignon Amsterdam : North-Holland , pp.
Bovenberg , A. Brealey , Mark , and C. Quigley , eds. Cecchini , P. Catinat and A. Sandford Bath, U. Cnossen , Sijbren , and Carl S. Conrad , Robert F. Das-Gupta , Arindam , and Ira N. Deaton , Angus , and Nicholas H. Due , John F. Gillis , C. Shoup , and G. Sicat Washington : World Bank , pp. Edwards , Jeremy S. Fitzgerald , J. Quinn , B. Whelan , and J. Gale , William G. Zodrow and Peter Mieszkowski , eds.
Gillis , Malcolm , Carl S. Hall , Robert E. Hemming , Richard , and John A. Aaron Washington : Brookings Institution , pp.
Hossain , Shahabuddin M. Jenkins , Glenn P. Kay , John A. Shoup , and Gerardo C. Sicat Washington : The World Bank , pp.
Kenyon , Daphne A. Kortenaar , G. Kotlikoff , Laurence J. Feldstein and A. Auerbach Amsterdam : North-Holland , pp. Lahiri , S. Lent , George E. Leuthold , Jane H. Khalilzadeh-Shirazi and A. Shah Washington : World Bank , pp. McLure , Charles E. Washington : American Enterprise Institute.
Pellechio , Anthony J. Ring , Raymond J. Sah , Raaj K. Schenk , Alan , and Howell H. Shoup , Carl S. Shoup , and Gerardo P. Stockfisch , J. Sullivan , Clara K. Summers , Victoria P. Tait , Alan A. Newbery and N. Stern Oxford : Oxford University Press , pp.
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Burkina Faso. This page provides - Philippines Sales Tax Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.
Sales Tax Rate in Philippines is expected to reach Trading Economics members can view, download and compare data from nearly countries, including more than 20 million economic indicators, exchange rates, government bond yields, stock indexes and commodity prices.
Features Questions? Contact us Already a Member? It allows API clients to download millions of rows of historical data, to query our real-time economic calendar, subscribe to updates and receive quotes for currencies, commodities, stocks and bonds. Click here to contact us. Please Paste this Code in your Website. In Philippines, the sales tax rate is a tax charged to consumers based on the purchase price of certain goods and services.
The benchmark we use for the sales tax rate refers to the highest rate. Revenues from the Sales Tax Rate are an important source of income for the government of Philippines.
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