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Comment by jwr | Hacker News Reader

I find this amusing: I'm from Poland, where after the VAT tax was introduced in the 1990s, there were famous "VAT carousel" crimes, with people ending up in prison. The basic idea was similar, except you also collected VAT refunds from the state.

If you search for "vat carousel" today, it seems this is still a thing.

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VAT is a joke of a tax. It's quite incredible why the government concerns itself with chasing people's accounts around. What a waste.

If something can't be monitored with minimal effort, it only serves to enrich the legal/accountancy/hr/admin priest caste.

The amount of labour wasted on moving numbers around numbers is staggering.

edit: Between the government and businesses, VAT costs 5% in admin fees to raise. In a modern world where most transactions are digital, is this a great use of resources?

VAT is trivial for businesses to deal with. You add x% onto every invoice you issue. The VAT due to be paid to the government is a simple sum of the amounts distinctly shown on each invoice you issue minus the sum of the VAT amounts on invoices you’ve paid. Income/employment taxes, corporate tax, import taxes, etc are orders of magnitudes more complex, dynamic and subject to legal interpretation. I was a small business owner for a while years ago and did the VAT myself. But there was no way I would even attempt employment or corporation taxes - covered by endless legislation and changing every year - that was a job for the accountant.

I've multiple times done a minor dive into why a VAT tax is seen as a reasonable tax? It... seems as regressive as a sales tax with even more layers of intervention? I've always eventually lost interest in trying to make sense of it, but they sure seem popular in Europe so there must be something to them?

My current belief is that there should really just be a wealth tax on assets (Federal) and a land value tax on land (States); nothing else.

It is a progressive tax. It is purely neutral when considered as a sales tax (same percentage, whether you buy a cheap loaf of bread or a luxury gizmo), regressive as a share of income when you consider the poor expend more of their revenue into daily expenditures (whereas the rich put a greater proportion into savings), but back to neutral when you consider savings are meant to be used one day anyway, and slightly progressive in countries where VAT is lower for food and other vital daily expenditures.

https://taxfoundation.org/blog/value-added-tax-vat-progressi...

I feel like I am saying regressive in the sense that it effects the poor more than the rich, full stop.

Being neutral relative to a sales tax is a confusing starting point. I consider a sales tax to be a truly bad tax, as it disproportionately effects the poor.

There used to be a wealth tax and land value tax in Sweden (aka world champion of taxation), but they were abolished simply because being taxed yearly on an fixed asset doesn't mean you have the liquidity to pay the taxes from your income. They had also caused the some of the wealthiest people in the UK to be Swedes, IKEA being Swiss and Dutch, and a lot of other movements of capital to other countries. All in all, wealth and value tax are a big loss of income for the government.

Yeah, I hear you. And it is historically true.

But why can't we just say "2% over a billion, 1% over a million; 50% if you choose to move your assets out of the country". It does not seem that unreasonable to insist that you keep your monies in the country that lead to your wealth?

Generally, billionaires have already moved their assets to tax-havens. Because it is the sane thing to do. And the minute a bill for anti-movement is scheduled for a vote, the rest will be moved before the bill comes into effect.

Instead of taxing leavers, one should provide tax cuts for returners. Their investment locally means jobs will be created locally and taxes will subsequently be paid locally anyway. Win-win for everyone.

VAT is the simplest of all taxes for businesses to deal with. VAT taxes business profits in a simple and completely unavoidable way before companies have a chance to throw their best accountants, lawyers and consultants at the task of minimizing corporation tax.

VAT is based on flows of cash so is trivial to calculate and to collect. Wealth taxes require valuation and are just too easy to minimize and are expensive to calculate, and difficult to extract. (E.g. I own shares in a family member’s small business via a loan I provided. What’s that shareholding worth for the purposes of a wealth tax?)

VAT acts also as a sales tax as well as a tax on “added value” - business profits - so replacing two separate tax regimes with a single trivial-to-calculate, difficult-to-avoid (requiring two parties to conspire together), easy-to-collect (cash-flow based) tax.

Without getting into the politics of taxation, it’s the best designed tax there outs.

Hmm, I'd never thought about the fact that a VAT tax requires two sides of a party in order to defraud. That is kind of neat and a beneficial property of VAT taxes I had never considered.

Good thing we don't cater society to your beliefs, else it would lead to collapse of the welfare state and cause the needless deaths of tens of millions of Americans.

VAT is a regressive tax. It hits everyone along the way, rich or poor. It hits the poor especially hard proportionally.

VAT is a progressive tax.

https://taxfoundation.org/blog/value-added-tax-vat-progressi...

Source for the "5%"?

VAT carousel is fraud. This is pre-legal.

I first hear about this from a guy running a warehouse. He noticed the same boxes commining in again and again.

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