value-added tax

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value-added tax

(VAT), levy imposed on business at all levels of the manufacture and production of a good or service and based on the increase in price, or value, provided by each level. Because the consumer ultimately pays a higher price for the taxed commodity, a VAT is essentially a hidden sales tax. Originally introduced in France (1954), it is now a major part of the tax structure of most Western European nations. In the early 1990s the U.S. government considered instituting a VAT to fund national health care programs.
References in periodicals archive ?
Unfortunately, those models continue to allow for noncompliance only in income taxes, even though the authors explicitly model consumption taxes. The basic assumption of this approach is that a tax on consumption can largely be enforced, so evasion is highly unlikely.
In real terms, the burden of the consumption taxes would fall on the consumers (although some of the burden would be shared by producers and sellers) and would result in a loss of real purchasing power of consumption goods and services for existing wealth.
Because income and consumption taxes treat saving differently, tax reform could have important effects on wealth accumulated before the reform.
Page (Deloitte & Touche LLP): Consumption taxes typically are labeled as much more regressive than the system we have now, meaning that the bottom 80 percent of income earners will suffer a tax increase, while the top 20 percent will get a tax decrease.
THREADGILL: Any time retailers hear the term "consumption taxes," it sends shivers up our spines.
A look at some alternatives The report examines four types of consumption taxes critical to understanding election-year debates:
Income taxes don't encourage savings; consumption taxes do.
The Clinton Administration is giving serious consideration to consumption taxes as it formulates its future economic plan.
Indeed, Fortune recently forecast that regardless of who is inaugurated in 1989, "consumption taxes are almost inevitable." It is an odd policy for liberals to favor, as it will tax the entire income of poor and near-poor worker (who consume all that they earn), most of the income of the working class (which saves very little), but only a fraction of the income of the rich (who save considerably).
However, consumption taxes are noted for their regressivity due to larger tax burdens being incurred by lower income groups.
consumption taxes are superior to ideal income taxes.
Students need to know the basic differences between income and consumption taxes and how to determine the system on which a proposal is based.