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  1. #1
    ABW Ambassador
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    Question Can someone please explain VAT
    I'm hoping some UK and other European members can explain how your VAT works.
    What is taxed?
    What and/or who is exempt, if any.

  2. #2
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    From my undergrad studies memory.
    A bit of tax is added at every stage of production of a product, all the way down to the time where the product is sold to the consumer.

    or
    http://en.wikipedia.org/wiki/Value_added_tax

  3. #3
    ABW Ambassador ladidah's Avatar
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    What is taxed?

    Each country have their own specifics and rates.

    http://ec.europa.eu/taxation_customs...s/index_en.htm

  4. #4
    Outsourced Program Manager John Jupp's Avatar
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    http://www.hmrc.gov.uk/vat/managing/...orts/goods.htm

    This is the best link for VAT rules from the UK to the EU and beyond.

    It is not just goods as this also applies to services.
    Flambi Media Limited - USA/UK/EU Affiliate Management Expertise

  5. #5
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    Thanks John

    A businessman from Nottingham once told me that the VAT Police [his term] were quite serious when it came to collections.

  6. #6
    Outsourced Program Manager John Jupp's Avatar
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    Serious is an ABSOLUTE understatement. They make the Gestapo seem like a Boy Scout movement!

    VAT must be paid by the 9th of every quarter. PAYE (payroll tax) by the 19th of every month. Any late payment and fines. Then comes an audit. They also carry out through HMRC (Her Majesty's Revenue & Customs) a random audit and every company can expect at least one visit every few years, for which you MUST keep seven years trading paperwork (everything) ready for immediate inspection.

    They have the power to close a business down at any time for any reason.

    So when it comes to VAT and paying my taxes, I am a good little boy and make sure everything is available and all is paid on time. No matter how complicated it can get with three currency accounts, 2 online bank accounts, an ecommerce trading account and invoicing to all parts of the world, everything but everything is fully accounted.
    Flambi Media Limited - USA/UK/EU Affiliate Management Expertise

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  8. #8
    Outsourced Program Manager John Jupp's Avatar
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    Think of VAT as a Federal Sales Tax, replacing State Sales Tax and that is in effect what VAT is. A tax on all goods and services provided. Companies can reclaim VAT on expenditure, offsetting against VAT raised. It places the emphasis on every company to become an unpaid taxman for the Government.

    In some years each quarter, companies may for instance receive a VAT rebate as their outgoing VAT has been higher than the incoming VAT they have charged.

    Now that effectively half the States have or are on the verge of introducing additional online sales taxes and considering that States generally have rates of Sales Tax already implemented, it would make sense for a set Standard to be implemented at a Federal level. Hence the mooting about the adoption of this as a means of raising revenue from the consumer.
    Flambi Media Limited - USA/UK/EU Affiliate Management Expertise

  9. #9
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    A VAT or National Sales Tax with a few tweaks for the US should be a good model replacing the arcane income tax codes altogether. A VAT of 30% should be all with no sales / property or tax credits or tax rebates or other shitty complications. I think the innovation and economy will boom with simplified tax structure. On the grand scale of US GDP, a 30% VAT should generate all the income needed at federal and state levels!. Simple, Efficient and a booming economy to follow. Period.

  10. #10
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    A VAT tax is not a simple tax. It creates an accounting nightmare. Every company has to calculate the tax to be paid as well as the credit for tax they paid. For a mfg company or any company with inventory, this adds a lot more work for the accounting department.

  11. #11
    Moderator MichaelColey's Avatar
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    So in other countries with a VAT, did they permanently eliminate all other taxes? Somehow, I suspect that it's kind of like "debt consolidation". It sounds good on the surface, but if you don't take care of the problems that got you into debt in the first place, you end up just getting deeper and deeper in debt.
    Michael Coley
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  12. #12
    Member sueapitman's Avatar
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    I think what redtagsales is talking about is the fair tax. For it to work all income taxes, corporate gain taxes, etc; must first be permanently eliminated by law, and then a consumption tax would be levied on goods at the point of consumption. Hence the name "fair tax".
    The VAT, whatever it actually is, is on top of income and other taxes.

  13. #13
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    Quote Originally Posted by sueapitman View Post
    I think what redtagsales is talking about is the fair tax. For it to work all income taxes, corporate gain taxes, etc; must first be permanently eliminated by law, and then a consumption tax would be levied on goods at the point of consumption. Hence the name "fair tax".
    The VAT, whatever it actually is, is on top of income and other taxes.
    yeah .. you're right .. it is called fair-tax. the name escaped me!
    consumption tax also has better compliance and reduces the accounting needs.

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