Value added tax - Revision history

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	<onlyinclude>A '''value added tax (VAT)''' is a consumption [[tax]] that is levied on the difference between the price paid by the seller and the price paid by the consumer for a good.</onlyinclude><ref>J.Black, N. Hashimzade, and G. Myles. (2009) "Value-added Tax." [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043-e-3285?rskey=L50wN3&result=1, 2009 [Aug 14, 2016]</ref>		<onlyinclude>A '''value added tax (VAT)''' is a consumption [[tax]] that is levied on the difference between the price paid by the seller and the price paid by the consumer for a good.</onlyinclude><ref>J.Black, N. Hashimzade, and G. Myles. (2009) "Value-added Tax." [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043-e-3285?rskey=L50wN3&result=1, 2009 [Aug 14, 2016]</ref>
	At any stage of production and at the sale when value is added to a product, the VAT is charged. The VAT accumulates until the product is sold to a final consumer and at each stage producers are either refunded or pay their level of tax minus the previous amount.		At any stage of production and at the sale when value is added to a product, the VAT is charged. The VAT accumulates until the product is sold to a final consumer and at each stage producers are either refunded or pay their level of tax minus the previous amount.

	==Application of the VAT==		==Application of the VAT==
	This chart illustrates how a VAT applies to the production of [[gasoline]]:<ref>~~Investopedia.~~ "~~Value-Added Tax.~~" ~~[Online]~~, ~~Available: http://www~~.~~investopedia.com/terms/v/valueaddedtax.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186~~[~~Aug 14~~, ~~2016~~].</ref>		This chart illustrates how a VAT applies to the production of [[gasoline]]:<ref name=Ox_econ>"A Dictionary of Economics" published Oxford University Press, 2013. Edited by John Black, Nigar Hashimzade, and Gareth Myles Online version accessed [August 17th, 2017].</ref>

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	*A producer extracts and sells crude oil to a refinery for the price of $50.00, $55.00 with the VAT.		*A producer extracts and sells crude oil to an [[oil refinery]] for the price of $50.00, $55.00 with the VAT.
	*From this sale the extraction producer remits the $5.00 from the VAT to the government.		*From this sale the extraction producer remits the $5.00 from the VAT to the government.
	*The refinery refines the crude oil into gasoline for sale to gas stations at a price of $100.00, $110.00 with the VAT.		*The refinery refines the crude oil into gasoline for sale to gas stations at a price of $100.00, $110.00 with the VAT.

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[[Category:Done 2016-04-30]]
<onlyinclude>A '''value added tax (VAT)''' is a consumption [[tax]] that is levied on the difference between the price paid by the seller and the price paid by the consumer for a good.</onlyinclude><ref>J.Black, N. Hashimzade, and G. Myles. (2009) "Value-added Tax." [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043-e-3285?rskey=L50wN3&result=1, 2009 [Aug 14, 2016]</ref>
At any stage of production and at the sale when value is added to a product, the VAT is charged. The VAT accumulates until the product is sold to a final consumer and at each stage producers are either refunded or pay their level of tax minus the previous amount.

==Application of the VAT==
This chart illustrates how a VAT applies to the production of [[gasoline]]:<ref>Investopedia. "Value-Added Tax." [Online], Available: http://www.investopedia.com/terms/v/valueaddedtax.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186[Aug 14, 2016].</ref>

::::::{| class="wikitable"
|-
| '''Stage of Production'''|| '''Sale Price ($)''' || '''With VAT (10%)''' || '''Gross VAT Amount ($)''' || '''Net VAT Rendered ($)'''
|-
| [[Crude oil]] || $50.00 || $55.00 || $5.00 || $5.00
|-
| Refined to [[Gasoline]] || $100.00 || $110.00 || $10.00 || $5.00
|-
| Gasoline (final)|| $150.00 || $165.00 || $15.00 || $5.00
|-
| Total || - || - || - || $15.00
|}

*A producer extracts and sells crude oil to a refinery for the price of $50.00, $55.00 with the VAT.
*From this sale the extraction producer remits the $5.00 from the VAT to the government.
*The refinery refines the crude oil into gasoline for sale to gas stations at a price of $100.00, $110.00 with the VAT.
*Because the previous producer already remitted the $5.00 from their stage of production, the refinery only has to remit $5.00.
**'''Notice:''' Even though the sale price of the refinery product is $100.00 the value they added was only $50.00 because they paid $55.00 for the crude oil. If the value they added to the product by refining it was $50.00 then the tax is 10% on that $50.00, $5.00.
*Finally the gas station sells the gasoline to the consumer at a price of $150.00, $165.00 with the VAT.
*Just as before, the gas station will remit the $5.00 for the tax as the previous remissions have been made proportional to the value added at each stage.

==VAT in Use==

With the exception of the United States, all of the [[OECD]] countries use a VAT to collect consumption [[revenue]]s. In 2012, VAT taxes accounted for 19.5% of total tax revenue in OECD countries and while this percentage fell slightly between 2005 and 2009 (during the economic crisis), the levels have remained steady since.<ref> OECD (2014),''Consumption Tax Trends 2014'', OECD Publishing. [Online], Available: http://dx.doi.org/10.1787/ctt-2014-en, 2014[Aug 14, 2016]</ref>

The VAT is advocated as a better alternative to the [[sales tax]] and [[income tax]] system used in the United States. this is because it is a tax on aggregate consumption rather than final consumption. This means that every time a product is bought or sold a tax is collected rather than just at the final sale of the product to the consumer.<ref>W. G. Gale and B. H. Harris. ''A VAT for the United States: Part of the Solution.'' Tax Analysts, 2011,pp. 1-2.</ref>

==See Also==
*[[Tax]]
*[[Sales tax]]

==References==
{{reflist}}