Obama suggests value-added tax may be an option

[grumbler]

unfortunately, you fail to understand that like all taxes, it's fairly easy to avoid a good part of it.  Or to understand that there are a lot of criminals out there who specializes if false billing to make false tax claims, or in restaurants the ever popular 'ZAP' software wich lets a particular restaurant delete half the day's bill in a single... ZAP.

I fail to understand this?  Thanks.  I did not know that.  Please be more precise, though.  I understand everything you say, so it isn't clear to me what it is that I don't understand.  As you are the expert, I am sure you are willing to share your expertise (gained byu joining a club in college, maybe?)

Although the government is very creative in recovering its money (they make false claim themselves, and since you're guilty until proven innocent when it comes to fiscality, it's harder to defend yourself) and will now install a black box, there are still ways to avoid the sales/VAT taxes.

Do you understand that there are always ways to avoid taxes?  Do you understand that governments attempt to enforce tax laws (and that you will, for instance, be charged with a crime if you engage in smuggling? 

Do you understand how silly you sound when you claim without any evidence that I don't understand things while displaying ignorance of the principles involved?  For instance, you can only import goods worth C$60 total per package duty-free in the case of a gift, and C$20 for non-gifts.  Vehicles must pay GST

If your vehicle qualifies for importation, you must register it in the RIV program when you report to the CBSA office upon arrival in Canada. The RIV program registration fee is $195 plus the goods and services tax (GST) (and the Quebec sales tax for vehicles entering through a port in Quebec). You also have to pay any customs and other import assessments, including taxes, that may apply.

, per http://cbsa-asfc.gc.ca/publications/pub/bsf5048-eng.html

[viper37]

They're very different taxes.  Businesses have a good reason to pay VAT, they don't to pay sales tax.  Also I think you're coming on a bit strong about the general anti-avoidance rule and I believe that in the UK it's not applied to VAT because that's rather complicated I think our GAAR is just for direct taxes.

As one of our companies have been (falsely) accused of tax avoidance, there are two ways they work when they suspect fraud:
1- Sales  X  %of tax
2- How much stuff you bought (inventory method).

#1 is of course all to their advantage since they assume you have no expenses.  It works for SMBs who are just over the minimum sales requirements to perceived taxes. Not very good with big corporations.


#2 They check how much stuff you bought and deduce your supposed sales from this.
The problem is, they figure you have zero inventory in this case, so companies keeping large stock are penalized.  And they don't send an inspector to check your inventory or evaluate it, so you have to go to court and prove you keep a lot of stuff in inventory and that's why not everything was sold.


Bottom line is there are multiple ways for tax avoidance and the government will always assume you are a criminal even if you make an honest mistake, simply because there are lots of ways to be dishonest.

[viper37]

I fail to understand this?  Thanks.  I did not know that.  Please be more precise, though.  I understand everything you say, so it isn't clear to me what it is that I don't understand.  As you are the expert, I am sure you are willing to share your expertise (gained byu joining a club in college, maybe?)

Many restaurants use a softwares that will simply erase the transactions from their cash registers.  The government has now decided that all restaurants will need to have some kind of "black box" where all transactions are recorded and where you can't touch it, only the governement can see what's written on it.

But anyway, all I was saying is that there are many ways to avoid sales tax as well as income tax.

Do you understand that there are always ways to avoid taxes?  Do you understand that governments attempt to enforce tax laws (and that you will, for instance, be charged with a crime if you engage in smuggling? 

What you fail to understand is that sales tax (VAT) is not a solution to reduce income loss on tax evasion.  People always find ways to avoid taxes, and that's my only point.

And having multiples VAT rates on multiple products is simply a bureaucratic nightmare, and a nightmare for SMBs too.

Do you understand how silly you sound when you claim without any evidence that I don't understand things while displaying ignorance of the principles involved?  For instance, you can only import goods worth C$60 total per package duty-free in the case of a gift, and C$20 for non-gifts. 

Vehicles must pay GST

you pay the GST when you register your car for use on the road.
In the case of a reconstructed vehicle, how is the value determined?
I'm not talking about what's legal here.  I'm talking tax evasion.  Afaik, in Canada&USA, tax evasion is not legal.  It's a national sport in Quebec apparently, but it's still not legal.  It's not like people evading their income tax don't know it's illegal.  Yet they do it now.

A sales tax is not a bad idea, but it's not a replacement to income tax, nor should it be seen as a way to eliminate (or severly reduce) tax fraud.  If anything, tax frauds have increased in Quebec since we have the GST and the PST.

No use quoting me the laws, I know them.  You don't have to declare the full value of a product, so you can have anything smallish marked as gift by a mail-order shop.

[Tamas]

I haven't read grumbler's argument over the holy nature of the VAT. Take this from me, I am from a nation of exper tax avoiders: there are good ways to cheat the VAT. Not to mention stealing extra money from the government if its stupid enough.

I am not against VAT per se, even if I am undecided on wether that or income tax is superior. I sure hate to pay both. But if it is a tax, there are ways to cheat it. Just accept it.

[Martinus]

I disagree. Any business that can fail to issue an invoice and sell a service or a good "under the table" can also fail to recognize the income from that sale in the income tax filing. And unlike the income tax - which is paid by all citizens, VAT is paid only by businesses, which are much less numerous than citizens (and thus easier to check on) and have less incentives to cheat (unless you are dealing with the original manufacturer of a given good, someone who sells you some good and does it "under the table" is unable to recover the VAT he himself paid when he purchased the good or an input into it).

there are multiple ways to avoid what your describing... You get the tax deduction from the stuff you bought, but you don't pay the taxes on all the stuff you sell
You need to make a step in the real world Marty.

They can't recover VAT on the goods they bought unless they can match it with VAT on the goods they sold (and if they "just make it" they are a prime target for a tax control). And unless everybody in the supply chain cheats (which makes it that more likely to be discovered), if a business buys a good with VAT and then the good just disappears without a corresponding VAT sale, it is going to be discovered very fast in any tax control.

What you seem to be unable to grasp is that you can cheat on any tax - that's why governments spend lots and lots of money on tax investigation and control. However, VAT evasion is easier to spot, both because the incentives to cheat are smaller, "it takes two to tango" (because the buyer may want to get a VAT in for various reasons), and the number of VAT payers is significantly lower than a number of PIT/CIT payers, which makes the latter easier to control.

[Martinus]

I haven't read grumbler's argument over the holy nature of the VAT. Take this from me, I am from a nation of exper tax avoiders: there are good ways to cheat the VAT. Not to mention stealing extra money from the government if its stupid enough.

I am not against VAT per se, even if I am undecided on wether that or income tax is superior. I sure hate to pay both. But if it is a tax, there are ways to cheat it. Just accept it.

You are retarded, and this folksy Eastern European attitude of yours is annoying. Noone is saying that you cannot cheat on taxes - most civilized countries (I don't count Hungary as one) have tax enforcement authorities for this very reason.

And we are not talking about some mom-and-pop shop selling two loafs of swamp bread in your town, but whether big turnover retailers can cheat on VAT - and usually they are unable to without this being discovered pretty soon (I don't know about Hungary again, but in Poland, VAT enforcement is extremely aggressive, and unlike income tax, which is spread throughout the populace, VAT revenue concentrates in a relatively small number of high-turnover businesses which are easier to supervise).

[grumbler]

Many restaurants use a softwares that will simply erase the transactions from their cash registers.  The government has now decided that all restaurants will need to have some kind of "black box" where all transactions are recorded and where you can't touch it, only the governement can see what's written on it.

But anyway, all I was saying is that there are many ways to avoid sales tax as well as income tax.

Yes, I understand all that.  What I want to know is what6 I don't understand.

What you fail to understand is that sales tax (VAT) is not a solution to reduce income loss on tax evasion.  People always find ways to avoid taxes, and that's my only point.

You keep saying this, and yet you don't explain what I don't understand. Obviously, I understand that VAT is not a complete solution to tax evasion, and your point about people trying to evade taxes is pretty "duh!'  Maybe you don't understand that VAT, unlike sales tax, is charged throughout the supply chain, and therefor creates incentives to get the customer to pay so that part of the seller's costs are reduced?

A sales tax is not a bad idea, but it's not a replacement to income tax, nor should it be seen as a way to eliminate (or severly reduce) tax fraud.  If anything, tax frauds have increased in Quebec since we have the GST and the PST.

My simple point was that a VAT is more fraud-resistant than a sales tax.  None of the other issues raised by you were part of my point.

[grumbler]

I haven't read grumbler's argument over the holy nature of the VAT.

Nor have I!   

[MadImmortalMan]

They can't recover VAT on the goods they bought unless they can match it with VAT on the goods they sold (and if they "just make it" they are a prime target for a tax control). And unless everybody in the supply chain cheats (which makes it that more likely to be discovered), if a business buys a good with VAT and then the good just disappears without a corresponding VAT sale, it is going to be discovered very fast in any tax control.

So just to be clear--the VAT does capture taxes on goods that don't make it to the end of the supply chain due to this factor, right? And a sales tax would not capture revenue on this same product.

[viper37]

They can't recover VAT on the goods they bought unless they can match it with VAT on the goods they sold

of course they can

it is going to be discovered very fast in any tax control.

not a fact.

However, VAT evasion is easier to spot,

nope.  Just as hard to spot.

both because the incentives to cheat are smaller, "it takes two to tango" (because the buyer may want to get a VAT in for various reasons),

ah?  If you evade your income tax, it does not take two to tango?  So, your employer declares your fees, but you don't and you so avoid all income taxes?  I don't think so.

and the number of VAT payers is significantly lower than a number of PIT/CIT payers, which makes the latter easier to control.

But there are more transactions to check, so they still need a lot of inspectors because it takes a lot more time to audit a corporation and an individual.

[viper37]

Yes, I understand all that.  What I want to know is what6 I don't understand.

You keep saying this, and yet you don't explain what I don't understand. Obviously, I understand that VAT is not a complete solution to tax evasion, and your point about people trying to evade taxes is pretty "duh!'  Maybe you don't understand that VAT, unlike sales tax, is charged throughout the supply chain, and therefor creates incentives to get the customer to pay so that part of the seller's costs are reduced?

And what do you want?  A crash course in evading tax?  Bribe a tax collector and ask about it.  Experiment, find your own ways.

My simple point was that a VAT is more fraud-resistant than a sales tax.  None of the other issues raised by you were part of my point.

a VAT is a kind of sales tax.  It is no more easier or harder to evade it for somebody that wants to evade it.

The Quebec government recover most of its tax from foreign companies who are simply ignorant of our laws, and then they simply make a check.  However, when it comes to real fraud, they have just as much difficulties as with any kind of fraud.

There's a case that will likely go the Supreme Court where the government is trying to collect sales tax on estimated drugs sale from a Hell's Angels member.  I'm anxious to see the results.

[viper37]

So just to be clear--the VAT does capture taxes on goods that don't make it to the end of the supply chain due to this factor, right? And a sales tax would not capture revenue on this same product.

if the goods don't make it to the end of the supply chain, the VAT will not capture taxes on this.  Eventually, it should, though, as that is the principle.

Comanies have to keep inventory, and while the goods are in their inventory there are no taxes.  Also, stocks can be devaluated (i.e. you bought furnitures for your store in 2009, failed to sell it and in 2010 it's no longer 'hip', so you sell them for less than you paid for them), destroyed or stolen, in wich case there are no taxes perceived.

[MadImmortalMan]

if the goods don't make it to the end of the supply chain, the VAT will not capture taxes on this.  Eventually, it should, though, as that is the principle.

Comanies have to keep inventory, and while the goods are in their inventory there are no taxes.  Also, stocks can be devaluated (i.e. you bought furnitures for your store in 2009, failed to sell it and in 2010 it's no longer 'hip', so you sell them for less than you paid for them), destroyed or stolen, in wich case there are no taxes perceived.

Eh, but didn't the supplier you bought them from have to pay when he sold them to you, even if you destroy them or whatever?

[DontSayBanana]

Wait wait your government charges a fee to companies for hiring people?

Or a tax.  Say hello to FICA.  Since the employer contribution isn't counted as part of your pay, it's safe to call that a tax on the employer for having employees.

[grumbler]

Eh, but didn't the supplier you bought them from have to pay when he sold them to you, even if you destroy them or whatever?

The seller paid taxes on the value of what he sold you, less the taxes on the value of what he paid for them (which were paid on by his supplier).  If CC then sells for less than he paid, he owes less tax than what he paid.

Let's say the furniture store sells a distributor a chair for $50.  The distributor pays the factory a 5% VAT, or $2.50.  The distributor then sells the chair to  CC's store for $100.  CC pays the distributor $5 in taxes, of which the distro gets to keep $2.50 as reimbursement and sends $2.50 to the gub'mint.  If CC sells the chair for the $200 retail, he gets $10 in VAT, keeps $5 to reimburse for the VAT already paid, and sends $5 to the gub'mint.

Now, if the chair is destroyed or stolen, that $5 already paid in VAT becomes a deductible from the VAT owed by CC for other sales, because he could not collect it. CC is arguing that, because it is possible to claim that the chair was stolen rather than sold under the table, VAT will ultimately not be collected on the chair, because the $5 the government already has will be offset by the $5 credit CC will claim on the "stolen" chair.

This is correct, of course.  However, this is a much more complex swindle than simply selling the chair under the table and never reporting the sale at all.  The argument that the extra paperwork imposed on honest businesses isn't worth the cost of making this swindle difficult is, perhaps, a valid one.  The argument that anyone who favors a VAT over a sales tax "doesn't understand" is totally bogus.