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How is VAT different from Net Value Added Tax?
VAT is distinguished from turnover tax where each transaction is taxed on its gross value, in contrast to tax on net value added as in VAT. A VAT can be designed to have different forms, exemptions, and rates. The popularity of VAT with authorities is mainly due to its administrative advantages.
Which is the difference between VAT and turnover tax?
A turnover tax is imposed at each sale transaction. Consequently, a turnover tax tends to increase the final sale value to the consumer cumulatively. VAT is a tax not on the total value of the good being sold, but only on the value added to it by the last seller.
Which is a limitation of the VAT system?
VAT’s applicability has serious limitations especially for underdeveloped countries. VAT is a complicated system and needs honest and efficient government machinery to do cross checking and link up various production activities and the resulting tax liability of each firm.
How is a Value Added Tax ( VAT ) regressive?
By definition, the VAT, also known as goods and services tax, is a broad-based tax impose on the various stages of production, starting from raw materials to the final product. A VAT is considered as a “regressive tax,” because it taxes all people the same amount regardless of their income level or ability to pay.
Last Update: Oct 2021
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