What Should Be Used: Single or Multiple Vat Rates? Do They Influence Prices?

Topics: Value added tax, Tax, Vat Pages: 2 (542 words) Published: January 13, 2011
What should be used: single or multiple VAT rates? Do they influence prices?

One of the most interesting things to discuss is: Do multiple rates influence the prices or is it better to have just one VAT rate for all goods and services? Before finding out if the VAT influences prices, we should know what its role is. Value added tax is a tax on the value added to a product or material at each stage of its manufacture or distribution. So, as one product is taken through different stages from production to selling, a percentage of tax is added. At each stage of product’s life the money collected from the VAT are coming back to the payer, but only the final consumer will receive nothing in return. Having this point of view in mind, as a final consumer, the rate of VAT is wished to be the lowest so that the price of the product is bought to be the lowest also. On the other hand, as a producer, the VAT rate is important, because if the rate for one product is higher then of another one, it might be though that the product with the lower rate will be very well sold in comparison with the one with a higher rate. From the point of view of single or multiple VAT rates, a consumer could think about the fact that some products might be cheaper in one country that uses multiple VAT rates then in a country that has only one standard rate. Usually this happens in a country where a lower rate is applied for different types of goods or services. The taxes raised too much are one of the causes for which the power of buying different products is slowly decreasing. This is why for the countries that apply different taxes for different services or products, the demand is higher then for the countries that have same taxes rates for all types of products or services. We have to take into consideration that as the value added tax is an instrument through which the Government can gain some more money to fund its programs, if it is needed its value can be...
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