Many EU countries have a “VAT” and like feel like this is kinda targeting poor people. Like, for the rich, this is insignificant, for poorer people, a (example) 20% tax would be a huge burden. Why do they do this?
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It is, but it’s also a very efficient and difficult to evade tax. For many EU countries the VAT revenue is equal or larger than the income tax revenue.
Most Europeans don’t mind it. You can control your spending, so VAT doesn’t hit us in inconvenient ways, like for example, taxes on cars and property.
European countries compensate poor people with good social programs. So in the end, poor people are getting more benefits than the VAT they pay.
They also tax the rich through progressive income taxes, capital gains taxes, corporate taxes etc.
If you’re asking why not just tax the rich in place of a VAT, well, it’s sort of why not tax the rich to pay for absolutely everything we could want. The costs and difficulties in taxing the rich generally scale to the point where the marginal revenue raised by the tax becomes negative.
If you’re asking why not just tax the rich in place of a VAT, well, it’s sort of why not tax the rich to pay for absolutely everything we could want.
So basically, you can only tax so much before the rich get mad and leave the EU? 🤔
No, you can only tax the rich so much because a lot of the money is laundered through internationally sanctioned loopholes. There was a plan for that, but then some morons elected Trump so now that’s probably not happening.
But sales tax still works for that, since if you want to buy a Ferrari we’re keeping 20% automatically at the point of sale.
And since rich people tend to spend more money than poor people, sales tax is more regressive than other taxes, but not as much as one would think.
But sales tax still works for that, since if you want to buy a Ferrari we’re keeping 20% automatically at the point of sale.
Unfortunately, that is very easy to circumvent. Rich people usually own companies which made them rich in the first place. They can easily buy cars in the company name and write not just the VAT off, but income taxes as well.
That is true with or without VAT. VAT isn’t paid by the buyer, either. It’s the seller that makes the VAT payment.
So sure, the rich asshole may try to write off the Ferrari in their business tax, along with all the other loopholes (good luck with that, too-- I’ve gotten audited for much less), but 20% of that cost still went into taxes because the dealership paid in their VAT every three months like a good boy. That’s the entire point.
VAT dodging is an art and a science for contractors of all stripes and other grey economy actors, but if you’re a standing business like, say, a former Fiat subsidiary with a large worldwide business headquartered in Italy, VAT is the one tax you don’t get to mess with because it’s baked into every invoice.
Not really. You have to provide your own business ID in order to not be charged VAT, and they gets noticed and registered.
You’ll have to then explain why the Ferrari, specifically, was a business expense. If the tax administration doesn’t think it’s a good reason, you then have to pay the VAT anyway.
And don’t even get me started on the fucking bureaucratic stupidity that is importation or I’ll have to take my blood pressure medication.
Source: starting up my own business in Finland. Rip 25.5%VAT. Fuck NCP.
More like the rich will get even more proficient in tax avoidance
No
No, EU member states handle taxes individually.
But, that ease of travel is one inducement. (Consider, as billionaire Spaniard learns the government plans to tax an additional 100 million euros. With no border, is moving a few km next door to Portugal worth a 100 million?
More meaningful though is business taxes/regulations, which are a large part of why Europe has lost so many Unicorns to the NYSE and why within America, Texas is kind of killing it in terms of business relocations.
I personally think it’s a race to the bottom but those are the constraints that exist.
That tax is reduced for important goods in most countries, like with bread
Sales taxes, including VAT, are inherently regressive. Normally things like unprocessed food are exempted to minimize impact, but it does still affect the poor more than the rich. Why keep them? They are easy to collect, hard to avoid and can bring in lots of revenue without people noticing or complaining.
It’s a vat. Like a vat of oil. They deep fry the money, and then recirculate the crispy delicious money into the ecconomy. That’s what thfy mean by eat the rich. Deep fry their money, and eat their faces.
…what? Whys everyone looking at me like that?
Username checks out.
:P
Here in the Uk we have tax for services (council tax), tax for health care (national insurance), tax for all your income (income tax) and almost everything you buy includes a small tax called VAT (value added tax) which is about 20%. There’s also a few taxes on cigs, alcohol and petrol.
VAT not on food, books but it on basically everything else. The more things you buy, the more tax you’ve paid. You more yoy spend on items the more you pay.
I don’t know why people are calling it a tax on the poor. It’s obviously a tax on the biggest consumers.
It’s obviously a tax on the biggest consumers.
Yes and no.
You’re absolutely correct in terms of total dollars contributed.
But the flip side is in terms of percentage of income. The wealthier you are, the more likely you are to have stocks, property and the like, which are usually exempt. So, as a total percentage of income, a VAT tends to hit the poor harder. (That being said, other taxes like capital gains are more progressive etc to make up the difference.)
Stocks and property are taxed in the UK, just not with VAT: we have capital gains tax, dividend tax, and stamp duty.
Oh absolutely, it’s just the VAT itself is regressive, not the overall tax system.
It’s just a different implementation of sales tax. Non-European countries in the Global North also have it, including the big one I shall not name, just sometimes under a different form and thus different name.
Because fuck the poor and working class. Don’t forget that they’re double dipping since income is often taken out of your earnings before you even get your money then every single purchase is taxed too.
No, not every purchase is taxed, and not every purchase that is is taxed at the same rate.
These rates are set by individual countries (because “Europe”, lol) and can change year to year. For example Ireland doesn’t tax books, basic food staples, children’s clothes, medicines. Heating fuel is taxed but was set to a reduced rate during the cost of living crisis. Other countries will have different priorities.
VAT ensures that even those who have a large amount of wealth accumulated without “income” also contribute to society.
Don’t forget that they’re double dipping since income is often taken out of your earnings before you even get your money then every single purchase is taxed too.
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Because fuck the poor and working class.
I thought EU was very progressive since they often have stuff (like healthcare) much better than the US. Is their “progressiveism” a myth? Am I over-estimating how progressive they are? 🤔
The EU is one of the most progressive regions on Earth, if not the most. That said they’re definitely nowhere close to perfect, as seen from the encrypted messaging fiasco.
There’s another factor that nobody mentioned: the sales tax in EU countries is different for different products. This allows countries to incentive or disincentivize different classes of products by ramping the sales tax up or down. Higher tax on junk food, cigarettes and/or alcohol, low or nonexistent sales tax for basic ingredients and medicine.
Interestingly, France and the Czech republic tax wine and beer respectively like basic food.
How the fuck you think they pay for healthcare and social programs?
Taxing at point of sale is a weird way to do it.
A better way (in my opinion) is by income, the higher, the higher your tax rate.
A VAT is essentially like a “flat tax” rate, that some politicians in the US are proposing.
We do that too.
Not sure about countries in the EU, but in the UK your income is taxed at different rates depending on how much you earn in a year.
Depends how you look at it. Out of my wage, I lose ~50% after taxes and the healthcare system’s “fair share” and, depending on the country, the health system is so under-funded anyway that there’s a heavy incentive to give in and pay private if you want certain operations or some such done anytime in the foreseeable future.
China also uses a VAT and they’re way more progressive than the EU. As far as I know it’s generally worse in both fairness (can’t be used to decrease inequality) and impact to productivity to income tax, but it’s much easier to administer.
In what way does VAT hurt the poor more than the rich? Considering it’s on each item you buy it clearly impacts the rich more than the poor.
Because VAT is proportional to the item, not the person’s income. From one perspective, yes it’s a fair system but from another, the cost of living is significantly greater for a poor person than a wealthy person. Many are barely scraping by while others are out wining and dining and still getting plenty for free.
