Isn't EU's "VAT" a regressive tax? Why do they have that, instead of something like, taxing the rich?
Many EU countries have a "VAT" and like feel like this is kinda targeting poor people. Like, for the rich, this is insignificant, for poorer people, a (example) 20% tax would be a huge burden. Why do they do this?
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It's regressive in the sense that poor people spend more of their money on goods and services that include VAT.
It's also "broad based" in that wealthy people spend more money (in total) on things, and the vendors of those things collect the tax.
For example, if a company in Australia sells a $11m private jet to some asshole, that asshole just paid $1m in taxes.
Said asshole may well pay no income tax by virtue of their ability to disappear taxable income through complex business structures.
What do you mean "instead of"? There are many kinds of taxes in my country, which is in the EU. I pay a huge cut of my salary in taxes every month even before I pay VAT on things I buy.
Because we let the rich people make the rules.
It is, but it's also a very efficient and difficult to evade tax. For many EU countries the VAT revenue is equal or larger than the income tax revenue.
Most Europeans don't mind it. You can control your spending, so VAT doesn't hit us in inconvenient ways, like for example, taxes on cars and property.
European countries compensate poor people with good social programs. So in the end, poor people are getting more benefits than the VAT they pay.
Yes, you're correct: Poorer people spend most of not all of their available on income on everyday goods like groceries, clothes, etc...
Richer people spend (relatively speaking!) less of their available income on these items and save me
They also tax the rich through progressive income taxes, capital gains taxes, corporate taxes etc.
If you're asking why not just tax the rich in place of a VAT, well, it's sort of why not tax the rich to pay for absolutely everything we could want. The costs and difficulties in taxing the rich generally scale to the point where the marginal revenue raised by the tax becomes negative.
And this is why the 1983 tax cut in the US increased revenue as at the reduced rates more wealthy people paid rather than avoided taxes.
If you’re asking why not just tax the rich in place of a VAT, well, it’s sort of why not tax the rich to pay for absolutely everything we could want.
So basically, you can only tax so much before the rich get mad and leave the EU? 🤔
No, you can only tax the rich so much because a lot of the money is laundered through internationally sanctioned loopholes. There was a plan for that, but then some morons elected Trump so now that's probably not happening.
But sales tax still works for that, since if you want to buy a Ferrari we're keeping 20% automatically at the point of sale.
And since rich people tend to spend more money than poor people, sales tax is more regressive than other taxes, but not as much as one would think.
More like the rich will get even more proficient in tax avoidance
No, EU member states handle taxes individually.
But, that ease of travel is one inducement. (Consider, as billionaire Spaniard learns the government plans to tax an additional 100 million euros. With no border, is moving a few km next door to Portugal worth a 100 million?
More meaningful though is business taxes/regulations, which are a large part of why Europe has lost so many Unicorns to the NYSE and why within America, Texas is kind of killing it in terms of business relocations.
I personally think it's a race to the bottom but those are the constraints that exist.
No
We have VAT in America. The States got pissy that we were buying things online and not paying sales tax. Now we have to pay VAT and sales tax because Google and such caved in to pressure, and the rich assholes still do whatever they want. Capitalism is hell and America is doomed.
Good luck y'all.
That tax is reduced for important goods in most countries, like with bread
Children's clothing too.
Essential goods have a 6% taxation in my country (Portugal). This also applies to the first 200kw/h you use in your home.
Then there is a 13% for services, like restaurants. I think wine is also taxed thia way.
The higher tier is reserved for non essential items, like cookies, chocolate, fuels (which are technically being double taxed), cars, etc.
We also pay a direct contribution for our social security system (11% over your gross salary, monthly), plus a direct taxation over our overall monthly salary (the minimum wage workers are exempt from this).
The discussiom on these taxes is long, old and boring but it essentially boils down to having those who want something, pay for it.
Sales taxes, including VAT, are inherently regressive. Normally things like unprocessed food are exempted to minimize impact, but it does still affect the poor more than the rich. Why keep them? They are easy to collect, hard to avoid and can bring in lots of revenue without people noticing or complaining.
It's a vat. Like a vat of oil. They deep fry the money, and then recirculate the crispy delicious money into the ecconomy. That's what thfy mean by eat the rich. Deep fry their money, and eat their faces.
.......what? Whys everyone looking at me like that?
Username checks out.
:P
Here in the Uk we have tax for services (council tax), tax for health care (national insurance), tax for all your income (income tax) and almost everything you buy includes a small tax called VAT (value added tax) which is about 20%. There’s also a few taxes on cigs, alcohol and petrol.
VAT not on food, books but it on basically everything else. The more things you buy, the more tax you’ve paid. You more yoy spend on items the more you pay.
I don’t know why people are calling it a tax on the poor. It’s obviously a tax on the biggest consumers.
It’s obviously a tax on the biggest consumers.
Yes and no.
You're absolutely correct in terms of total dollars contributed.
But the flip side is in terms of percentage of income. The wealthier you are, the more likely you are to have stocks, property and the like, which are usually exempt. So, as a total percentage of income, a VAT tends to hit the poor harder. (That being said, other taxes like capital gains are more progressive etc to make up the difference.)
It's just a different implementation of sales tax. Non-European countries in the Global North also have it, including the big one I shall not name, just sometimes under a different form and thus different name.
Yes, you're correct: Poorer people spend most of not all of their available on income on everyday goods like groceries, clothes, etc...
Richer people spend (relatively speaking!) less of their available income on these items and save me
The rich don't have to pay taxes. The taxes they pay are largely voluntary.
That is the way of the world. It's a truism. That's what happens. You cannot change it.
Bonus extra: the trickle-down theory almost entirely doesn't exist either. BUT the second generation - the grandchildren - after the original rich person will usually piss almost all of the fortune away.
Second bonus extra: the same thing happened with serious socialism; the leaders become dictators.
Anarchy for the win. 😁
Because fuck the poor and working class. Don't forget that they're double dipping since income is often taken out of your earnings before you even get your money then every single purchase is taxed too.
No, not every purchase is taxed, and not every purchase that is is taxed at the same rate.
These rates are set by individual countries (because "Europe", lol) and can change year to year. For example Ireland doesn't tax books, basic food staples, children's clothes, medicines. Heating fuel is taxed but was set to a reduced rate during the cost of living crisis. Other countries will have different priorities.
VAT ensures that even those who have a large amount of wealth accumulated without "income" also contribute to society.
Don’t forget that they’re double dipping since income is often taken out of your earnings before you even get your money then every single purchase is taxed too.
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Because fuck the poor and working class.
I thought EU was very progressive since they often have stuff (like healthcare) much better than the US. Is their "progressiveism" a myth? Am I over-estimating how progressive they are? 🤔
The EU is one of the most progressive regions on Earth, if not the most. That said they're definitely nowhere close to perfect, as seen from the encrypted messaging fiasco.
There's another factor that nobody mentioned: the sales tax in EU countries is different for different products. This allows countries to incentive or disincentivize different classes of products by ramping the sales tax up or down. Higher tax on junk food, cigarettes and/or alcohol, low or nonexistent sales tax for basic ingredients and medicine.
Interestingly, France and the Czech republic tax wine and beer respectively like basic food.
Depends how you look at it. Out of my wage, I lose ~50% after taxes and the healthcare system's "fair share" and, depending on the country, the health system is so under-funded anyway that there's a heavy incentive to give in and pay private if you want certain operations or some such done anytime in the foreseeable future.
China also uses a VAT and they're way more progressive than the EU. As far as I know it's generally worse in both fairness (can't be used to decrease inequality) and impact to productivity to income tax, but it's much easier to administer.
In what way does VAT hurt the poor more than the rich? Considering it’s on each item you buy it clearly impacts the rich more than the poor.
Because VAT is proportional to the item, not the person's income. From one perspective, yes it's a fair system but from another, the cost of living is significantly greater for a poor person than a wealthy person. Many are barely scraping by while others are out wining and dining and still getting plenty for free.