A report on Value Added Tax Essay - 1528 Words

A report on Value Added Tax Introduction Value Added Tax originated in France in 1954 and is under implementation in more than hundred countries. Value Added Tax is perceived by many as means to promote neutrality and uniformity of tax burden and to provide incentives for increased productivity and industrialization. The spread of VAT to the developed and the developing countries alike certainly, makes for an interesting study. Financial Times (London) too stressed the growing importance of VAT when it observed in its centennial review â€Å"The economic and technological changes of the second half of the century have made VAT the quintessential modern tax†. It will not be an exaggeration if one were to say that the emergence of†¦show more content†¦Under the VAT system, no exemptions will be given and a tax will be levied at each stage of manufacture of a product. At each stage of value-addition, credit can be claimed on tax paid on inputs. †¢ It does not distort the business decisions as it does away with cascading. Only market forces rather than tax structure will guide vertical integration decisions once VAT is implemented. †¢ VAT permits easy and effective targeting of tax rates as a result of which the exports can be zero-rated. †¢ The input tax credit method encourages a system that ensures better tax compliance by generating a trail of invoices that supports effective audit and enforcement strategies. †¢ As far as India is concerned, VAT, if enforced properly could help in fiscal consolidation for the country. As a steady source of revenue, it could be used for reducing the debt burden in due course. †¢ Further, any globally accepted tax administrative system like VAT will help India integrate better in the WTO regime. How VAT works? Under the existing system, there is a tax levied at each stage of production which results in a ‘tax on tax’ or the cascading effect. Producers try to overcome this tax by vertically integrating their production process, which affects production decisions. VAT is implemented through a system of tax credits. When the purchaser purchases the goods, he’ll have an invoice whichShow MoreRelatedThe Impact Of Tax Structure Of The United Arab Emirates945 Words   |  4 PagesCurrently, the United Arab Emirates does not have a federal corporate income tax (CIT) regime; however, most of the Emirates introduced income tax decrees in the late 1960s, and taxation is therefore determined on an Emirate-by-Emirate basis. Under the Emirate-based tax decrees, CIT may be imposed on all companies (including branches and permanent establishments [PEs]) at rates of up to 55%. 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