This is such a common misconception that even business owners get wrong. No, it doesn't even out for the business, because they sell their products with a profit and thus pay more in VAT than they get back. You only get more back if you're selling for cheaper than it costs you to make it, meaning you're out of business pretty quick.
Edit: Congratulations to the people who are down voting very basic mathematics.
The detail that is missing from the mathematics is that companies fairly often buy more than they sell, which is called investment. Most early companies do not go with great profit if one removes all assets from the company. Buildings, cars, equipment and so on. If a new company takes a loan as a as initial investment, they are unlikely to have profits the first taxation year to cover it, and yet they still get to remove the vat from purchases.
From that one can make an additional insight. Most companies have less money during the early investment phase, which is where they get most benefit from removing vat from purchases.
Businesses don't "pay" VAT, they collect and remit VAT on behalf of the tax authority. A business (supplier) that doesn't sell to end consumers pays no VAT, even though they collect a lot and reclaim a lot. It fully nets out.
> A business (supplier) that doesn't sell to end consumers pays no VAT
They indeed pay no net VAT (it's not a cost for them in the sense of their profit and loss statement), but they do remit a bit of the VAT collected by the end consumer to their _local_ tax authority.
As an example, let's consider a VAT rate of 20%, and a Dutch company that buys from a French one and sells to a German one. Their costs per product are €80, and thus they pay €16 of VAT over that to their French suppliers. If they sell a product for €100 (i.e. they add €20 of value), then they collect €20 of VAT from their German buyers (which might in turn get it from the end consumers). There's a difference of €4 between what they received and paid in VAT, and that difference is collected by the Dutch tax authority. That €4 is not coincidentally the 20% VAT over the value added by the Dutch company.
Wrong, wrong, wrong. When the good passes from one country to the next, the vat from the first country is given back - as if it was bought tax-free - and the VAT of the country you're in applies.
Before the EU common market, you used to be able to do that VAT refund even for your own purchases as a private person on vacation - you can still, for example between the EU and Switzerland. It was even translating to tax-free vacation shopping because they weren't interested in collection taxes below a certain value.
No, that's not how it works. If a business sells to another business, then the buyer is the consumer, and VAT has to be paid. And of course they have to sell with a profit.
Many B2B offers and proposals are negotiated or priced without VAT mentioned, but it is absolutely added to the bill.
The only time it "nets out" is if a business has the same expenses for their purchases as for their sales, meaning they're soon bankrupt.
It nets out to everyone but the final consumer. Imagine 30% VAT rate:
Alice digs up some copper and tin and sells it to Bob for 10€ + 3€ VAT = 13€. Alice remits the 3€ to the authorities on Bob's behalf.
Bob casts bronze bars and sells them to Carol for 39€ + 11.70€ = 50.70€. Bob claims a 3€ refund for VAT he paid Alice and remits 11.70€ to the authorities on Carol's behalf.
Carol makes a sculpture from the bronze and sells it to a customer for 1014€ + 304.20€ VAT = 1318.20€. Carol claims a 11.70€ refund for VAT paid and remits 304.20€ to the authorities.
The end customer ends up paying 100% of the total VAT (304.20€). Everyone else nets out to 0.
That's just mental gymnastics. In the end the customer pays 100% of the costs a business has, that's completely obvious. Then we can say that businesses don't pay payroll tax either, because all salary costs are also baked into the price of the final products to customers.
You're correct with your calculations, but it's not honest to say that the customer pays the VAT and therefore it nets out for a business.
Which really shouldn't be surprising: if a business is not adding value, it's not a viable business. But if a business is adding value on net, it should indeed owe tax charged on net value added.
You're right, it's not surprising at all. It's a tax meant to make revenue for the government. But all my life I've heard from people (who have never had a business), that businesses get back all their VAT. It doesn't help showing them the accounting, which very clearly shows VAT paid and VAT deducted.
It's a misconception that is on the level of people believing that their progressive tax rates are applied back towards previous salaries or business owners who think you should increase prices for the customers you have to make up for the customers you lost.
It’s not really a tax on their profits. Consumers have to pay it on top of the net sales price, and they know that it won’t add to the company‘s bottom line. The money goes to the state every month (or quarter sometimes), deducted by the VAT the business itself already paid for services/products.
For accounting purposes, VAT is a totally separate cycle of money, and for every important financial metric, VAT is ignored. [Removed] If you happen to spend more VAT than you collect, you’ll get the negative back from the state. Also, the net price is always known because it must be shown on every invoice.
I don't know the initial incentives, but VAT is much harder to evade (businesses have to keep track/declare things if they want to reclaim the VAT they paid).
Also it's a consumption tax, in the end the end consumer is the one paying it (through higher price). The businesses in the middle are mainly collecting the tax on behalf of the state.
I mean, what's the rationale in the US for a business being taxed on their profits, and also having to pass along the sales tax they've collected?
It's just two forms of taxation. Sales tax/VAT is a fixed proportion of sales, and then you also pay tax on profit that's left.
You might as well ask why people pay income tax when they make money and then have to pay sales tax/VAT again when they spend it!
Of course, answering that is complicated, and there are a lot of factors. But the main one is basically that governments like to tax "everything", so that people/goods/services that might wind up evading one tax wind up paying another. Sales tax makes sure governments get revenue even when businesses make no profit, taxing profits makes sure governments get more revenue when businesses make more money.
1. They need to tax every economic transaction possible to maintain demand for the Euro currency and keep it from loosing its value. This is the most important reason.
2. To get more money in taxes for the government. There's people who argue that lower tax rates increases economic activity and in the end would increase tax revenue also for the government. The government doesn't see things that way. "You pay me now, pay more!"
3. Taxes on profits are an incentive for business owners to reinvest any surplus into growing their business, meaning more jobs etc.
On a product of 120€ with 70€ wages, they pay 20€ VAT on the 100€-before-tax, and they pay 25% IS (corporate tax) on the 30€ margin, so 7.5€ (this example is for France). If they distribute the remaining 22.5€ as dividends, the recipients pay up to 30% IR, so 7€.
VAT is most of the tax revenue by far. France’s budget is made of 50% VAT, 15% from corporate tax (IS), 10% from income tax (IR) and then the rest from various state revenue (like renting the palaces for movies).
It isn't just about the books or authors, just as a cafe isn't just about the bean-growers. Bookshops are social hubs. They give you a chance to browse and see what else is available in the area you are searching and often, not even in the area you are searching. For me, a good bookshop makes an area worthwhile to visit and hang out.
The ideal solution for safe bicycle lanes would be to have them away from the highways on a separate walk/cycle road network. But then you'll instead have the problem of rapists hiding and attacking people using these roads.
At the moment there is no way to download books neither from app nor website and not all ereaders support the installation of the app. I only found out about this by listening to a podcast the CEO recently did. Bookshop also wont refund ebook sales.
I have a Boox page. It's quirky, but I love that it has the normal Google play store and a great battery life.
Now I can use whatever app suits me, and I can buy my ebooks from whatever store has the best deal. Sometimes I'll find Kobo is cheaper than Kindle, for example.
Often I read older fiction that's out of copyright, I use the Moon+ Reader app on the Boox and it's as good as the Kindle except free.
No, Kobo and Pocketbook run Linux. Most of the Sony models too. Some Android readers like Tolino and Nook don't allow installing apps without jailbreaking.
> The vast majority of Americans simply don't give one iota of care as long as they are currently comfortable.
Can you blame them? They've been toiling hard for decades while getting poorer and poorer, while the privileged class has lived lives of wealth and comfort from milking these government institutions. Did they care about the vast majority being comfortable or not?
The repubs lost their battles, and decided they wanted to win at all costs. They had people show up to vote, vote in a bloc, volunteer for lower level positions, join multiple different organizations and basically organized them to dismantle the country.
If people can be driven to do that, then its not much to assume that at least a few more people could have done the same thing.
That's just laughable for entire generations of people, like Soviet headlines of how food production is beating all records while the store shelves are empty. People are getting absolutely murdered on rents and real estate inflation. If you're a landlord or can leverage your real estate, then good for you. You have never been wealthier.
Under the current monetary system, taxes have to be as complicated as possible, in order to force the government currency to be used in every imaginable transaction. The primary purpose of taxation is this. Actual revenue is second priority.
This is why more efficient or more fair taxation will never be introduced.
Edit: Congratulations to the people who are down voting very basic mathematics.
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