03-19-2019, 02:34 AM
Never understood, or rather, agreed to the premise of VAT. Where's the value?
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A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.
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If a used item is exchanged multiple times, the tracking of VAT seems a little complicated.
For example, if a motorcycle emblem new costs £20 and the VAT is £2 (lets use 10%), the total buyer's cost is £22.
Now the emblem is used for a few years and becomes "used". The owner sells it for the same £20. But - if he remembers (with paperwork?) - the VAT was already paid, which was £2. So that amount is deducted and the new VAT is on the amount of £20 x 10% = £2 minus the previous VAT of £2 = £0. In this particular use case, the buyer shouldn't be paying VAT, eh?
If the seller wanted to make a profit and sell the used emblem for £30, then the new VAT would be on the margin of gross profit. If I understand correctly, in this case the "value" is £30 x 10% = £3 minus previous VAT of £2 = £1. In this case the buyer would pay a total of £31 (30 + 1). Yes? No?
Who tracks the item's transaction history?
>>>
A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.
<<<
If a used item is exchanged multiple times, the tracking of VAT seems a little complicated.
For example, if a motorcycle emblem new costs £20 and the VAT is £2 (lets use 10%), the total buyer's cost is £22.
Now the emblem is used for a few years and becomes "used". The owner sells it for the same £20. But - if he remembers (with paperwork?) - the VAT was already paid, which was £2. So that amount is deducted and the new VAT is on the amount of £20 x 10% = £2 minus the previous VAT of £2 = £0. In this particular use case, the buyer shouldn't be paying VAT, eh?
If the seller wanted to make a profit and sell the used emblem for £30, then the new VAT would be on the margin of gross profit. If I understand correctly, in this case the "value" is £30 x 10% = £3 minus previous VAT of £2 = £1. In this case the buyer would pay a total of £31 (30 + 1). Yes? No?
Who tracks the item's transaction history?