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http://news.yahoo.com/s/ap/20100421/ap_on_bi_ge/us_obama_tax

QuotePresident Barack Obama suggested Wednesday that a new value-added tax on Americans is still on the table, seeming to show more openness to the idea than his aides have expressed in recent days.

Before deciding what revenue options are best for dealing with the deficit and the economy, Obama said in an interview with CNBC, "I want to get a better picture of what our options are."

After Obama adviser Paul Volcker recently raised the prospect of a value-added tax, or VAT, the Senate voted 85-13 last week for a nonbinding "sense of the Senate" resolution that calls the such a tax "a massive tax increase that will cripple families on fixed income and only further push back America's economic recovery."

For days, White House spokesmen have said the president has not proposed and is not considering a VAT.

"I think I directly answered this the other day by saying that it wasn't something that the president had under consideration," White House press secretary Robert Gibbs told reporters shortly before Obama spoke with CNBC.

After the interview, White House deputy communications director Jen Psaki said nothing has changed and the White House is "not considering" a VAT.

Many European countries impose a VAT, which taxes the value that is added at each stage of production of certain commodities. It could apply, for instance, to raw products delivered to a mill, the mill's production work and so on up the line to the retailer.

In the CNBC interview, Obama said he was waiting for recommendations from a bipartisan fiscal advisory commission on ways to tackle the deficit and other problems.

When asked if he could see a potential VAT in this nation, the president said: "I know that there's been a lot of talk around town lately about the value-added tax. That is something that has worked for some countries. It's something that would be novel for the United States."

"And before, you know, I start saying 'this makes sense or that makes sense,' I want to get a better picture of what our options are," Obama said.

He said his first priority "is to figure out how can we reduce wasteful spending so that, you know, we have a baseline of the core services that we need and the government should provide. And then we decide how do we pay for that."

Volcker has said taxes might have to be raised to slow the deficit's growth. He said a value-added tax "was not as toxic an idea" as it had been in the past.

Since then, some GOP lawmakers and conservative commentators have said the Obama administration is edging toward a VAT.

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:nelson:

I don't think VAT by itself is a bad idea, as long as it's used to offset the income tax.  Taxing income is a pretty daft way of levying taxes, IMO.

Quote from: DGuller on April 21, 2010, 07:31:54 PM
I don't think VAT by itself is a bad idea, as long as it's used to offset the income tax.  Taxing income is a pretty daft way of levying taxes, IMO.

A Democratic congress is unlikely to pass something so regressive and targeted at minorities.

I personally strongly prefer sales tax than income tax.

Quote from: Neil on April 21, 2010, 07:58:43 PM

Quote from: DGuller on April 21, 2010, 07:31:54 PM
I don't think VAT by itself is a bad idea, as long as it's used to offset the income tax.  Taxing income is a pretty daft way of levying taxes, IMO.

A Democratic congress is unlikely to pass something so regressive and targeted at minorities.

Make income tax apply only to the very richest, like it used to, and make VAT the main tax for most.  It's really a much cleaner tax system.

What's wrong with an income tax, DGul?

I dunno.  The whole idea makes me nervous.  Brilliantly the State of Missouri is considering a VAT system.  With the majority of the populace of the state living on the borders I don't see how that could possibly go wrong.

Quote from: DGuller on April 21, 2010, 08:24:01 PM

Quote from: Neil on April 21, 2010, 07:58:43 PM

Quote from: DGuller on April 21, 2010, 07:31:54 PM
I don't think VAT by itself is a bad idea, as long as it's used to offset the income tax.  Taxing income is a pretty daft way of levying taxes, IMO.

A Democratic congress is unlikely to pass something so regressive and targeted at minorities.

Make income tax apply only to the very richest, like it used to, and make VAT the main tax for most.  It's really a much cleaner tax system.

It's still not going to pass a Democratic congress, not matter how 'clean' it is.

Quote from: DGuller on April 21, 2010, 07:31:54 PM
I don't think VAT by itself is a bad idea, as long as it's used to offset the income tax.  Taxing income is a pretty daft way of levying taxes, IMO.

Offset higher income taxes?

That'll never pass, I'm surprised he's even talking about it. Can't see the upside.

We have to do something to cover the deficit and we know they are not going to cut spending no matter what party is in charge because then the voters will revolt...

One of these days we are going to have to pay for all this shit we have our federal government do.  Sorry American people.  The gravy train cannot go on forever.

No shit.  But I can't see anybody having enough popular support to address seriously the deficit issue until something (a crisis? greater media awareness a la the current global warming craze?) occurs to drive home its importance in the minds of the plebs.

Quote from: Valmy on April 21, 2010, 10:54:32 PM
they are not going to cut spending no matter what party is in charge because then the voters will revolt...
...  The gravy train cannot go on forever.

Then a revolt is inevitable.

Quote from: Pitiful Pathos on April 21, 2010, 08:28:43 PM
What's wrong with an income tax, DGul?

It discourages work and investments, and there is a whole host of double taxation issues that need to be dealt with, which bloats the tax code complexity enormously.

Quote from: DGuller on April 21, 2010, 11:39:50 PM

Quote from: Pitiful Pathos on April 21, 2010, 08:28:43 PM
What's wrong with an income tax, DGul?

It discourages work and investments, and there is a whole host of double taxation issues that need to be dealt with, which bloats the tax code complexity enormously.

I don't think VAT opponents in the US know what VAT is about. For example, it looks like they do not have any idea about the concept of VAT deduction.

Is there any difference to the consumer between sales tax and VAT? As far as I can tell, that's not the case...

Quote from: Martinus on April 22, 2010, 12:22:43 AM
I don't think VAT opponents in the US know what VAT is about. For example, it looks like they do not have any idea about the concept of VAT deduction.

Ironically, I bet most people who ate up the Fair Tax idea are absolutely aghast at the prospect of having VAT.

Quote from: DGuller on April 22, 2010, 12:51:45 AM

Quote from: Martinus on April 22, 2010, 12:22:43 AM
I don't think VAT opponents in the US know what VAT is about. For example, it looks like they do not have any idea about the concept of VAT deduction.

Ironically, I bet most people who ate up the Fair Tax idea are absolutely aghast at the prospect of having VAT.

Apparently.  Grover Norquist's organization is up in arms.

Quote from: Zanza on April 22, 2010, 12:43:33 AM
Is there any difference to the consumer between sales tax and VAT? As far as I can tell, that's not the case...

Err, VAT is a type of a sales tax.  :huh:

Quote from: Martinus on April 22, 2010, 01:37:39 AM

Quote from: Zanza on April 22, 2010, 12:43:33 AM
Is there any difference to the consumer between sales tax and VAT? As far as I can tell, that's not the case...

Err, VAT is a type of a sales tax.  :huh:

Yeah. A compounding one that charges the end consumer all of the tax cost of every transaction that happened before his.

Quote from: MadImmortalMan on April 22, 2010, 01:41:58 AM

Quote from: Martinus on April 22, 2010, 01:37:39 AM

Quote from: Zanza on April 22, 2010, 12:43:33 AM
Is there any difference to the consumer between sales tax and VAT? As far as I can tell, that's not the case...

Err, VAT is a type of a sales tax.  :huh:

Yeah. A compounding one that charges the end consumer all of the tax cost of every transaction that happened before his.

As I said, people here do not understand VAT (and the concept of VAT deduction). Your post shows why this is the case.

If you can show me one country where VAT works the way you describe, I will withdraw my objection (hint: it will definitely not be any EU country).

In fact, VAT is the tax where, from the economical perspective, the total value of a good is taxed only once. Unlike, say, income tax, where the same income is first taxed at the corporate level, then it is taxed again as a capital gains tax.

In a VAT system, there is no difference in the total amount of tax paid irrespective of whether the same good is manufactured only by one manufacturer and then sold to end user (e.g. a farmer bringing his goods to a farmer marker) or sold and bought ten times before it reaches the end user.

Quote from: Martinus on April 22, 2010, 02:11:36 AM
In a VAT system, there is no difference in the total amount of tax paid irrespective of whether the same good is manufactured only by one manufacturer and then sold to end user (e.g. a farmer bringing his goods to a farmer marker) or sold and bought ten times before it reaches the end user.

Okay then. Please explain it to me.

Why do we have to tax our citizens.  Why can't we tax other countries citizens.  Some kind of tribute system.

Quote from: DGuller on April 21, 2010, 11:39:50 PM

Quote from: Pitiful Pathos on April 21, 2010, 08:28:43 PM
What's wrong with an income tax, DGul?

It discourages work and investments, and there is a whole host of double taxation issues that need to be dealt with, which bloats the tax code complexity enormously.

Well I have no hard data in front of me, but my gut feeling is that in order to recoup lost tax revenues from scrapping income tax except for the 'very richest', wouldn't the VAT have to be set at extremely high levels?  And that would, of course, come with its own set of disincentives, e.g. reducing consumption.

Quote from: MadImmortalMan on April 22, 2010, 02:22:30 AMOkay then. Please explain it to me.

Businesses only pay the difference between the VAT they earn and the VAT they pay themselves.

Quote from: Pitiful Pathos on April 22, 2010, 03:38:15 AM
Well I have no hard data in front of me, but my gut feeling is that in order to recoup lost tax revenues from scrapping income tax except for the 'very richest', wouldn't the VAT have to be set at extremely high levels?  And that would, of course, come with its own set of disincentives, e.g. reducing consumption.

We have 19% VAT on most stuff, 7% on some essentials (mainly food). The revenue from that VAT is still less than the income tax revenue (which has higher rates than the US of course).

Quote from: Valmy on April 21, 2010, 10:54:32 PM
We have to do something to cover the deficit and we know they are not going to cut spending no matter what party is in charge because then the voters will revolt...

That's what I keep saying to welfare-craving Americans: it is a one way street. A politican will never plan to abolish any of it, in due time the only way they can differentiate between one another is how much more spending they promise.

Quote from: Tamas on April 22, 2010, 04:28:15 AM
That's what I keep saying to welfare-craving Americans: it is a one way street. A politican will never plan to abolish any of it, in due time the only way they can differentiate between one another is how much more spending they promise.

You are correct, if there really was no "President Clinton" who passed a welfare reform bill that reduced federal and state welfare payments enormously over time.

If there was such a president, I will just assume you spoke out of ignorance.

I dunno why the desire to make sweepingly inaccurate statements overcomes some posters (while others don't need to be overcome because they are permanently in that mode).

Fucking Tamastard.

You don't have VAT in the USA? Hmm... I thought everyone had it. Probably why things are relatively cheaper out there?

We don't have a VAT in Canada either. We have Sale taxes but they aren't VATs.

Quote from: Palisadoes on April 22, 2010, 07:00:35 AM
You don't have VAT in the USA? Hmm... I thought everyone had it. Probably why things are relatively cheaper out there?

One of the reasons.

Okay, so you have a single example of a noticable welfare cut. But we are not talking about the USA here, at least not exclusively. My sweeping point is raising alarm over the europification of the States. That is far from being a clearly good thing.

Quote from: Palisadoes on April 22, 2010, 07:00:35 AM
You don't have VAT in the USA? Hmm... I thought everyone had it. Probably why things are relatively cheaper out there?

There are sales taxes. Like Texas doesn't have a state income tax, so it has sky high property taxes and 8.25% sales tax because it tricks Conservatives into thinking they have low taxes. DERP HERP INCOME TAX EVIL DERP.

Quote from: Tamas on April 22, 2010, 07:20:04 AM
Okay, so you have a single example of a noticable welfare cut. But we are not talking about the USA here, at least not exclusively. My sweeping point is raising alarm over the europification of the States. That is far from being a clearly good thing.

Germany had drastic welfare cuts in the last decade too. So it is possible in Europe as well.

Quote from: Tamas on April 22, 2010, 07:20:04 AM
Okay, so you have a single example of a noticable welfare cut. But we are not talking about the USA here, at least not exclusively. My sweeping point is raising alarm over the europification of the States. That is far from being a clearly good thing.

"Europification" (:bleeding:) of the US is neither good nor bad.  It is good when European solutions to US problems work better than alternatives, and bad when they work worse than alternatives.  Sweeping hansifications almost never make the hansificator sound smart, though.

If you are truly worried about the US, wake me up when Americans start tackling other Americans just because they are carrying guns.

There are talks here to switch to a VAT system which, according to many economists, is much simpler to operate and more fair for the populus...  It does seem that taxing consumption is indeed fairer since you have a choice to consume or not whereas taxing income leaves one with no choices.  But I'm no economist so I can't really comment further.




G.

Quote from: Grallon on April 22, 2010, 09:21:09 AM
There are talks here to switch to a VAT system which, according to many economists, is much simpler to operate and more fair for the populus...  It does seem that taxing consumption is indeed fairer since you have a choice to consume or not whereas taxing income leaves one with no choices.  But I'm no economist so I can't really comment further.

You don't really have a choice but to consume stuff either, do you? It's not like you can live without food, shelter, energy, clothes etc. all of which can be taxed with a VAT. All your income is worthless if you don't consume some of it eventually.

Quote from: garbon on April 21, 2010, 07:09:50 PM
a new value-added tax on Americans

Surely that depends if I eat Americans in or take away?

We have both income tax from around 16% upwards, and 20%-25% VAT ^_^

Quote from: Palisadoes on April 22, 2010, 07:00:35 AM
You don't have VAT in the USA? Hmm... I thought everyone had it. Probably why things are relatively cheaper out there?

We do.  In Michigan.  That leader in fiscal practices.

Quote from: Zanza on April 22, 2010, 09:33:59 AM

You don't really have a choice but to consume stuff either, do you? It's not like you can live without food, shelter, energy, clothes etc. all of which can be taxed with a VAT. All your income is worthless if you don't consume some of it eventually.

You do have a choice when it comes to buying your 3rd car, your 5th blue ray player and all that excessive crap though.  Presumably the essentials are less taxed than the luxury items? 

Either way it cost money to operate a government and that money has to come from somewhere.  So it's either income or VAT or a mix.

Abolishing the govt isn't an option for anyone but the nutcases who'd rather live in chaos than pay their due to society.




G.

Quote from: Grey Fox on April 22, 2010, 07:08:40 AM
We don't have a VAT in Canada either. We have Sale taxes but they aren't VATs.

GST is a VAT.

Quote from: Martinus on April 22, 2010, 02:04:03 AM

Quote from: MadImmortalMan on April 22, 2010, 01:41:58 AM

Quote from: Martinus on April 22, 2010, 01:37:39 AM

Quote from: Zanza on April 22, 2010, 12:43:33 AM
Is there any difference to the consumer between sales tax and VAT? As far as I can tell, that's not the case...

Err, VAT is a type of a sales tax.  :huh:

Yeah. A compounding one that charges the end consumer all of the tax cost of every transaction that happened before his.

As I said, people here do not understand VAT (and the concept of VAT deduction). Your post shows why this is the case.

If you can show me one country where VAT works the way you describe, I will withdraw my objection (hint: it will definitely not be any EU country).

Well, technically, the EU VAT is a consumption tax (in German Mehrwertsteuer vs. Umnsatzsteuer), but the result in practice is (with some exceptions) the same:
Businesses have the VAT they paid reimbursed by the state while paying the VAT on their sales to the state.

Example: You buy from your supplier something for 120 EUR (including 20 EUR VAT) and re-sell for 132 (including 22 EUR VAT): Your tax debt to the state is 2 EUR, for the 10 EUR of value you "added". The consumer carries the full VAT that is on a product (though of course it's owed by the business making the final sale, not the consumer), though the state (de facto) gets it in bits and pieces from all the previous links in the supply chain.

Quote from: Tamas on April 22, 2010, 10:12:59 AM
We have both income tax from around 16% upwards, and 20%-25% VAT ^_^

How do you pay for something that costs, say, 4.23 goats (vat incl)?

Quote from: grumbler on April 22, 2010, 11:41:03 AM

Quote from: Tamas on April 22, 2010, 10:12:59 AM
We have both income tax from around 16% upwards, and 20%-25% VAT ^_^

How do you pay for something that costs, say, 4.23 goats (vat incl)?

The .23 will be paid in beets.

Quote from: MadImmortalMan on April 22, 2010, 01:41:58 AM
Yeah. A compounding one that charges the end consumer all of the tax cost of every transaction that happened before his.

Don't know much about the European's VAT, but in Canada, the Goods and Services Tax (GST) as well as Provincial Sales Tax (PST) are deductible for registered companies so the consumer only pay the tax on the added value of the product.

If my costs to build you a house are of 450 000$ and I'm selling the house for 500 000$, you pay the tax once on 500 000$, not on every single product that entered there.

I myself will be paying 2500$ (25k$ tax - 22.5k$).

The only problem I can see is implementing this in time of recession.  That's going to hurt.

Quote from: Pitiful Pathos on April 22, 2010, 03:38:15 AM
Well I have no hard data in front of me, but my gut feeling is that in order to recoup lost tax revenues from scrapping income tax except for the 'very richest', wouldn't the VAT have to be set at extremely high levels?  And that would, of course, come with its own set of disincentives, e.g. reducing consumption.

No, not extremely high levels, because you tax basically everything that you buy.

When GST was voted in Canada, it was set at 7%, as a temporary tax until the deficit was eliminated.  The Liberal Party promised its abolition 2 elections in a row but never touched it.
The new Conservative governement has lowered it to 5%.

If it was only the federal tax, it wouldn't be so bad.  But Quebec is taxing the federal tax with its own tax (7,5% now, 9,5% in 2 years) and that hurts when combined with the rest of our silly fiscal policies.

The tax can be modulated in various ways to avoid its regressive impact.  You can remove the tax for basic products (non commercial rents, used houses, milk, meat, non prepared food products, etc) and you can also give a credit to lower income families/individuals.

Quote from: Grallon on April 22, 2010, 09:21:09 AM
There are talks here to switch to a VAT system which, according to many economists, is much simpler to operate and more fair for the populus...  It does seem that taxing consumption is indeed fairer since you have a choice to consume or not whereas taxing income leaves one with no choices.  But I'm no economist so I can't really comment further.
G.

it's a different system.  It's not better nor worst, because eventually, there are exceptions & refunds for some people, as well as there are ways to avoid most of it if you're a tad clever&dishonest.  Wich I would never recommend to anyone, of course.

You can avoir income tax by working "under the table", or performing any activity linked to black market (drugs, racket, etc), but it's tricker to avoid sales tax, so usually many economists believe it's a smart way to avoid losing money to the subterranean economy.

When it was first implemented, the GST was the tool of the Devil for most of the left since it was considered to be a "regressive tax", i.e. you make 30k$ a year or 3 million a year you pay the same percentage of tax.
Now, funnly enough, the left wants higher sales tax as well as higher income tax - for the rich only of cours, wich means anyone above 50k$.

Quote from: Grallon on April 22, 2010, 10:48:51 AM
You do have a choice when it comes to buying your 3rd car, your 5th blue ray player and all that excessive crap though.  Presumably the essentials are less taxed than the luxury items? 

most people don't have a choice in buying a car or two though.

The point of any sales/VAT/GST taxe is to either tax or not tax, not multiply the rates.

Say you don't tax food wich is considered essential, and you don't tax residential rents.
A rich person will usually eat more than the poor one.  In fact, the poor one may end up consuming more refined products (chicken wings, salted peanuts, chicken nuggets, frozen products, etc) than the rich one who could afford to have time to cook, or the very rich who could afford a cook.

When it comes to rent, a typical appartment in Le Vieux Québec will cost twice more than one in Limoilou (poorest place in the city), so the rich is getting off easy on this one because we don't want to penalize the poor.

There's no easy way to tax, all taxes hurt, all taxes add a burden on the middle class.  The very rich can afford to pay more taxes and still have a decent living, the poor will pay very little or no taxes be it on income or sales tax with the refund we give them.

Quote
Abolishing the govt isn't an option for anyone but the nutcases who'd rather live in chaos than pay their due to society.
G.

:blush:
the idea is tempting, though :D

Quote from: viper37 on April 22, 2010, 02:53:07 PM
Say you don't tax food wich is considered essential, and you don't tax residential rents.
A rich person will usually eat more than the poor one.  In fact, the poor one may end up consuming more refined products (chicken wings, salted peanuts, chicken nuggets, frozen products, etc) than the rich one who could afford to have time to cook, or the very rich who could afford a cook.

When it comes to rent, a typical appartment in Le Vieux Québec will cost twice more than one in Limoilou (poorest place in the city), so the rich is getting off easy on this one because we don't want to penalize the poor.

You seem to be completely missing the point that the rich will be spending much lower percentage of their income on necessities, and thus if VAT is excluded on necessities, that would make for a progressive taxation system.  Progressivity is defined in percentage terms, not absolute terms.

Quote from: viper37 on April 22, 2010, 02:30:41 PM
When GST was voted in Canada, it was set at 7%, as a temporary tax until the deficit was eliminated.  The Liberal Party promised its abolition 2 elections in a row but never touched it.
The new Conservative governement has lowered it to 5%.

To be fair to Mulroney, he said no such thing.  It replaced another tax, the Manufacturers Sales Tax (or some such name), and was supposed to be 'revenue neutral', but it was never said to be a temporary tax.

And some places dont' have any provincial sales tax to add on to the 5%. :yeah:

Quote from: Barrister on April 22, 2010, 04:38:00 PM
And some places dont' have any provincial sales tax to add on to the 5%. :yeah:

Word.

Quote from: Fate on April 22, 2010, 08:42:44 AM
There are sales taxes. Like Texas doesn't have a state income tax, so it has sky high property taxes and 8.25% sales tax because it tricks Conservatives into thinking they have low taxes. DERP HERP INCOME TAX EVIL DERP.

Austin takes a 6.25% sales tax.  Period.  The other 2% plus all your property taxes go to your county and other local tax districts.  So if your property taxes are sky high, blame the city and the county.

Quote from: DGuller on April 22, 2010, 04:01:07 PM

Quote from: viper37 on April 22, 2010, 02:53:07 PM
Say you don't tax food wich is considered essential, and you don't tax residential rents.
A rich person will usually eat more than the poor one.  In fact, the poor one may end up consuming more refined products (chicken wings, salted peanuts, chicken nuggets, frozen products, etc) than the rich one who could afford to have time to cook, or the very rich who could afford a cook.

When it comes to rent, a typical appartment in Le Vieux Québec will cost twice more than one in Limoilou (poorest place in the city), so the rich is getting off easy on this one because we don't want to penalize the poor.

You seem to be completely missing the point that the rich will be spending much lower percentage of their income on necessities, and thus if VAT is excluded on necessities, that would make for a progressive taxation system.  Progressivity is defined in percentage terms, not absolute terms.

Man, 30 years after introducing VAT in Spain many self-defined 'experts' keep missing this point. I don't know if they are just that blind or the problem with them is bad faith.

I pay about 30% municipal income tax and 25% VAT. When I finish my studies I will become a high earner and therefore pay up to an additional 20% income tax to the state.

Welcome to the workers paradise that is Sweden. 

Is it true in Sweden every man gets twenty virgins?

Only every twentieth man.

And I forgot, the employer pays about 30% of my salary as an employers fee to the state.

Quote from: Zanza on April 22, 2010, 03:48:17 AM

Quote from: MadImmortalMan on April 22, 2010, 02:22:30 AMOkay then. Please explain it to me.

Businesses only pay the difference between the VAT they earn and the VAT they pay themselves.

This.

Imagine the manufacturer "A" sells the good "X" at a base price of $10 (with 10% VAT) to B. The total price is therefore $11. A issues an invoice to B which states that (i.e. gives the VAT amount and the base price) and, having collected the price, pays $1 to the state treasury (as VAT).

Now, imagine B goes on to resell the good "X" to C at a base price of $20. He charges the 10% VAT, which brings the total price to $22. He issues an invoice to C which states that, and having collected the price, should pay $2 to the state treasury (as VAT). However, from that amount he is able to deduct the $1 of VAT that was charged on the "input" good - therefore he only pays $1.

The effect is that B makes the full $10 on the resale and there is no compounding effect. (In practice, B has to take all his incoming invoices and outgoing invoices each month or each quarter - depending on which tax-reporting scheme he is using - and calculate all the incoming VAT and outgoing VAT and only pay - or recover - the difference). (For the record, since this is Languish, and people are deliberately dumb - obviously you don't need to match the in-VAT and out-VAT for the same good or service in the same month - you have 3 years to do so).

The same rule applies if B would use the good "X" as any sort of "input" for creating another good and then sold this new good (the input is understood broadly - for example, since I am not an employee but operate as an independent consultant, I charge VAT on my services to the lawfirm I work with - this means I can deduct VAT on any purchases I do that can be seen as contributing to my work performance, such as a mobile phone or a laptop) he would be able to deduct from the VAT he would have to pay to the state treasury any VAT paid on the input good(s) by whoever sold him that good.

Only if B didn't "add any value" (hence the name of "VAT") and simply consumed the good without generating any good or service he would then sell, he would not be able to recover any VAT.

I know this sounds complicated, but the obvious advantage over a classic sales tax where you collect the tax only once, at the moment the good goes to the end user ,is that with the VAT system you don't need to make up your mind when you sell or purchase the good as to whether the buyer is going to be an enduser. Plus the state gets the money earlier, which I guess is good for them. :P

Quote from: Martinus on April 23, 2010, 01:53:06 AM

Quote from: Zanza on April 22, 2010, 03:48:17 AM

Quote from: MadImmortalMan on April 22, 2010, 02:22:30 AMOkay then. Please explain it to me.

Businesses only pay the difference between the VAT they earn and the VAT they pay themselves.

This.

Imagine the manufacturer "A" sells the good "X" at a base price of $10 (with 10% VAT) to B. The total price is therefore $11. A issues an invoice to B which states that (i.e. gives the VAT amount and the base price) and, having collected the price, pays $1 to the state treasury (as VAT).

Now, imagine B goes on to resell the good "X" to C at a base price of $20. He charges the 10% VAT, which brings the total price to $22. He issues an invoice to C which states that, and having collected the price, should pay $2 to the state treasury (as VAT). However, from that amount he is able to deduct the $1 of VAT that was charged on the "input" good - therefore he only pays $1.

The effect is that B makes the full $10 on the resale and there is no compounding effect.

The same rule applies if B would use the good "X" as any sort of "input" for creating another good and then sold this new good (the input is understood broadly - for example, since I am not an employee but operate as an independent consultant, I charge VAT on my services to the lawfirm I work with - this means I can deduct VAT on any purchases I do that can be seen as contributing to my work performance, such as a mobile phone) he would be able to deduct from the VAT he would have to pay to the state treasury any VAT paid on the input good(s) by whoever sold him that good.

Only if B didn't "add any value" (hence the name of "VAT") and simply consumed the good, he would not be able to recover any VAT.

I know this sounds complicated, but the obvious advantage over a classic sales tax where you collect the tax only once, at the moment the good goes to the end user is that with the VAT system you don't need to make up your mind when you sell or purchase the good whether whoever is buying is going to be an enduser. Plus the state gets the money earlier, which I guess is good for them. :P

That

One thing that is important is that VAT is charged (and can only be deducted by) "commercial" sellers. So if a consumer A buys the good from a shop (which charges him the price with VAT) and then resells the good not as a part of his commercial activity (but say on ebay) he doesn't charge VAT on that sale, but neither he can recover the VAT he was charged himself on the sale from the shop.

Only businesses and entrepreneurs can do so. Furthermore, normally, even if a business or an entrepreneur is selling a good or a service, but this is not part of its normal commercial activity, then again it is treated like a sale by a consumer.

I gave you an example before about my consultancy activity - if I decided to resell the laptop I bought, I would not be charging VAT on it, because my business is "provision of legal services" not "sale of laptops".

So in the end, you could say that income tax penalizes those who invest (obviously VAT is only charged on goods and services, and not say on dividends) and make profits (since if you at least break even on the good's resale, your transaction is effectively VAT-neutral), and VAT penalizes those who consume or fail to make profit (since if you resell the good at a price lower than the one you bought it for, you won't be able to recover the full VAT on your purchase, obviously).

Plus VAT is much more flexible as an economic behavior tool, since you can set different VAT rates on different goods to boost consumption of some and not the others etc.

Quote from: DGuller on April 22, 2010, 04:01:07 PM

Quote from: viper37 on April 22, 2010, 02:53:07 PM
Say you don't tax food wich is considered essential, and you don't tax residential rents.
A rich person will usually eat more than the poor one.  In fact, the poor one may end up consuming more refined products (chicken wings, salted peanuts, chicken nuggets, frozen products, etc) than the rich one who could afford to have time to cook, or the very rich who could afford a cook.

When it comes to rent, a typical appartment in Le Vieux Québec will cost twice more than one in Limoilou (poorest place in the city), so the rich is getting off easy on this one because we don't want to penalize the poor.

You seem to be completely missing the point that the rich will be spending much lower percentage of their income on necessities, and thus if VAT is excluded on necessities, that would make for a progressive taxation system.  Progressivity is defined in percentage terms, not absolute terms.

But if you take necessities (food, clothing, housing, heating costs) out you are taking out a substantial proposrtion of your tax base (about 30% in the UK). Also, while bread and kids' t-shirts may be a necessity, caviar or posh frocks are luxuries.

Quote from: Gups on April 23, 2010, 04:18:16 AM
But if you take necessities (food, clothing, housing, heating costs) out you are taking out a substantial proposrtion of your tax base (about 30% in the UK). Also, while bread and kids' t-shirts may be a necessity, caviar or posh frocks are luxuries.

Well, in Spain - I suppose it's more or less the same all over Europe - common bread, milk, cheese, eggs, fruits, vegetables, cereals, potatoes, onions & carrots pay the minimum (4%), all other food pays 7%. Bottled water, etc, pay 7%, alcoholic drinks 16%.

There is always potential for conflict, tough. For example, books & magazines in paper pay 4%, but in CDs or digital format they pay 16%! Publishers are complaining loudly, and rightly so, and I think that rule will be changed soon...

Quote from: Martinus on April 23, 2010, 02:16:38 AM
So in the end, you could say that income tax penalizes those who invest (obviously VAT is only charged on goods and services, and not say on dividends) and make profits (since if you at least break even on the good's resale, your transaction is effectively VAT-neutral), and VAT penalizes those who consume or fail to make profit (since if you resell the good at a price lower than the one you bought it for, you won't be able to recover the full VAT on your purchase, obviously).

Plus VAT is much more flexible as an economic behavior tool, since you can set different VAT rates on different goods to boost consumption of some and not the others etc.

You can also use the income tax to set behavior. I think the major advantage of the income tax over the VAT is that the VAT is much more avoidable. For most people it is easier to receive goods and services under the table than a paycheck.

Quote from: Threviel on April 23, 2010, 01:40:39 AM
Only every twentieth man.

And I forgot, the employer pays about 30% of my salary as an employers fee to the state.

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

Quote from: Baron von Schtinkenbutt on April 22, 2010, 09:59:36 PM
Austin takes a 6.25% sales tax.  Period.  The other 2% plus all your property taxes go to your county and other local tax districts.  So if your property taxes are sky high, blame the city and the county.

Don't bore Fate with facts.

Quote from: alfred russel on April 23, 2010, 07:58:04 AM

Quote from: Martinus on April 23, 2010, 02:16:38 AM
So in the end, you could say that income tax penalizes those who invest (obviously VAT is only charged on goods and services, and not say on dividends) and make profits (since if you at least break even on the good's resale, your transaction is effectively VAT-neutral), and VAT penalizes those who consume or fail to make profit (since if you resell the good at a price lower than the one you bought it for, you won't be able to recover the full VAT on your purchase, obviously).

Plus VAT is much more flexible as an economic behavior tool, since you can set different VAT rates on different goods to boost consumption of some and not the others etc.

You can also use the income tax to set behavior. I think the major advantage of the income tax over the VAT is that the VAT is much more avoidable. For most people it is easier to receive goods and services under the table than a paycheck.

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).

Quote from: alfred russel on April 23, 2010, 07:58:04 AM

Quote from: Martinus on April 23, 2010, 02:16:38 AM
So in the end, you could say that income tax penalizes those who invest (obviously VAT is only charged on goods and services, and not say on dividends) and make profits (since if you at least break even on the good's resale, your transaction is effectively VAT-neutral), and VAT penalizes those who consume or fail to make profit (since if you resell the good at a price lower than the one you bought it for, you won't be able to recover the full VAT on your purchase, obviously).

Plus VAT is much more flexible as an economic behavior tool, since you can set different VAT rates on different goods to boost consumption of some and not the others etc.

You can also use the income tax to set behavior. I think the major advantage of the income tax over the VAT is that the VAT is much more avoidable. For most people it is easier to receive goods and services under the table than a paycheck.

Isn't VAT structured in such a way that everyone has incentives to be honest (unlike the sales tax, where foregoing it can be a competitive advantage)?

Quote from: Martinus on April 23, 2010, 08:26:58 AM

Quote from: alfred russel on April 23, 2010, 07:58:04 AM

Quote from: Martinus on April 23, 2010, 02:16:38 AM
So in the end, you could say that income tax penalizes those who invest (obviously VAT is only charged on goods and services, and not say on dividends) and make profits (since if you at least break even on the good's resale, your transaction is effectively VAT-neutral), and VAT penalizes those who consume or fail to make profit (since if you resell the good at a price lower than the one you bought it for, you won't be able to recover the full VAT on your purchase, obviously).

Plus VAT is much more flexible as an economic behavior tool, since you can set different VAT rates on different goods to boost consumption of some and not the others etc.

You can also use the income tax to set behavior. I think the major advantage of the income tax over the VAT is that the VAT is much more avoidable. For most people it is easier to receive goods and services under the table than a paycheck.

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).

A lot of purchases could be shifted to ebay or other mail order places that may not have a VAT included.

People like us have almost no opportunity to cheat on income taxes. Our employers report our salary and our banks report our investment income, and those are the ways we make money. Shift to a VAT and suddenly we have many more opportunities for tax avoidance.

Quote from: Martinus on April 23, 2010, 08:26:58 AM
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).

I think a lot of people fail to understand this, and thus fail to comprehend the difference between sales taxes and VAT.  Your point is, I think, correct.

Edit:  DG beat me to this point.

Quote from: Valmy on April 23, 2010, 08:22:14 AM
Wait wait your government charges a fee to companies for hiring people?

Ours does too.

Quote from: alfred russel on April 23, 2010, 08:49:18 AM
A lot of purchases could be shifted to ebay or other mail order places that may not have a VAT included.

The seller has already paid VAT on the product (unless he or she is outside the VAT-charging country, in which case import duties exceed the savings on VAT)

QuoteShift to a VAT and suddenly we have many more opportunities for tax avoidance.

Disagree completely.

Quote from: grumbler on April 23, 2010, 08:54:30 AM

Quote from: alfred russel on April 23, 2010, 08:49:18 AM
A lot of purchases could be shifted to ebay or other mail order places that may not have a VAT included.

The seller has already paid VAT on the product (unless he or she is outside the VAT-charging country, in which case import duties exceed the savings on VAT)

QuoteShift to a VAT and suddenly we have many more opportunities for tax avoidance.

Disagree completely.

You are right, in the fantasy land that import duties are collected on mail orders from mom and pop shops.

Quote from: alfred russel on April 23, 2010, 09:07:07 AM
You are right, in the fantasy land that import duties are collected on mail orders from mom and pop shops.

I have no idea what fantasy land you are proposing here.  Are all your arguments set in this fantasy land, or just this one?

Quote from: alfred russel on April 23, 2010, 09:07:07 AM
You are right, in the fantasy land that import duties are collected on mail orders from mom and pop shops.

Are international shipping orders from mom and pop shops a substantial part of US commerce?

Quote from: Martinus on April 23, 2010, 09:49:01 AM

Quote from: alfred russel on April 23, 2010, 09:07:07 AM
You are right, in the fantasy land that import duties are collected on mail orders from mom and pop shops.

Are international shipping orders from mom and pop shops a substantial part of US commerce?

No. But aren't we talking about the potential to replace the income tax with a VAT? That would require a very high tax rate--higher than is in Europe today. If I own a convenience store in a country without a VAT, why not open a website where I can sell the same Gillette razors 30-40% less than in America?

Quote from: alfred russel on April 23, 2010, 10:00:39 AM
No. But aren't we talking about the potential to replace the income tax with a VAT? That would require a very high tax rate--higher than is in Europe today. If I own a convenience store in a country without a VAT, why not open a website where I can sell the same Gillette razors 30-40% less than in America?

Because the import duties will be 30-40%, and so no one will use your service.

You could try smuggling, of course, but any tax system results in some smuggling or other tax evasion.

This isn't just Obama - though I'm impressed he's mentioned it.  I've read a huge number of arguments from tax professionals since I started my new job that basically say the US should adopt a VAT and some people predict that as globalisation increases and high-earners, like companies, can increasingly move around to choose a tax liability that personal income tax will move the way of corporate income tax. 

All over the world (with the exception of the US, to a lesser extent China and, I think Belgium) corporate income tax has fallen from an average of around 40% to under 30.  This is partly because big companies can move around to avoid high tax on worldwide income and so on (again the US and China are the only countries that are lagging on this and China's come a long way in the past decade or two) but also because they're able to use accountants to more effectively dodge taxes than small or medium companies meaning you have a tax system for all its apparent fairness actually operates rather unfairly, it's also quite expensive for the state to collect.  VAT and low corporate tax, the argument goes, work better because VAT's self-collecting (companies can tax deduct VAT so it's in their best interests to pay it and keep a record - this is why sales taxes of over about 10% don't always work), because of that it lowers the cost of collection, to some extent mitigates against the use of creative tax deductions and loopholes (for example Exxon) and businesses including the big ones are generally happier than to pay VAT than a 40% tax on worldwide income - or in the case of the US 35%.

The big idea is that you'd move to a system in personal tax that was similar.  A moderate tax-free allowance, a reasonable flat tax and a higher rate of VAT.  The problem is it's difficult to get round the unfairness of VAT being, for people, a fundamentally regressive tax.  The best I can think of is that, as in the UK, you make certain items VAT-free.  But, the theory goes, that would be cheaper remove unfairnesses within the income tax system to do with deductions and encourage high-earners to stay tax resident.

It should be an option.  My impression is that the US tax system needs an overhaul to be honest.  My understanding is that it was largely written and last reformed (as opposed to just added to) in the 1960s.  That was, especially in terms of corporate taxation, a very different world.  VAT should definitely be an option.  I think the other argument is that basically VAT's a lot more transparent.

QuoteGermany had drastic welfare cuts in the last decade too. So it is possible in Europe as well.

UK's had a fair few too.

Quote from: Barrister on April 22, 2010, 04:38:00 PM
To be fair to Mulroney, he said no such thing.  It replaced another tax, the Manufacturers Sales Tax (or some such name), and was supposed to be 'revenue neutral', but it was never said to be a temporary tax.

couldn't find the source, I really thought it was proposed as temporary until the deficit was resolved, but you might be right :)

Quote
And some places dont' have any provincial sales tax to add on to the 5%. :yeah:

yeah, I know.

Quote from: DGuller on April 22, 2010, 04:01:07 PM
You seem to be completely missing the point that the rich will be spending much lower percentage of their income on necessities, and thus if VAT is excluded on necessities, that would make for a progressive taxation system.  Progressivity is defined in percentage terms, not absolute terms.

they consume more and they save more.  What they save is not taxed right away.  What they consume is partially taxed.  It's not totally regressive because of various measures, but it's not entirely progressive, and not a real solution to tax evasion.

Quote from: Gups on April 23, 2010, 04:18:16 AM
But if you take necessities (food, clothing, housing, heating costs) out you are taking out a substantial proposrtion of your tax base (about 30% in the UK). Also, while bread and kids' t-shirts may be a necessity, caviar or posh frocks are luxuries.

here, unprocessed foods are not taxed, but every other thing you may consider "necessities" are taxed.  New housing is taxed, clothing is taxed, electricity&anything you can use to heat is taxed, etc.

Quote from: Martinus on April 23, 2010, 02:16:38 AM
So in the end, you could say that income tax penalizes those who invest (obviously VAT is only charged on goods and services, and not say on dividends) and make profits (since if you at least break even on the good's resale, your transaction is effectively VAT-neutral), and VAT penalizes those who consume or fail to make profit (since if you resell the good at a price lower than the one you bought it for, you won't be able to recover the full VAT on your purchase, obviously).

Plus VAT is much more flexible as an economic behavior tool, since you can set different VAT rates on different goods to boost consumption of some and not the others etc.

setting different VAT rates on different goods is a bureaucratic nightmare and it ends up costing more to administer than what you gain in revenues.

besides, there are a few things to consider: 

• buying on the internet from outside your country/province/state.  I avoid PST by buying from NCIX.  A company is only forced to perceive taxes on goods sold in the province/country of residence.  Before EA had a studio in Montreal, I could buy my games without taxes.  Now, I need to pay for them, so I use Steam instead.  No taxes.
  
• physical grey market.  Drive 2hrs south from Montreal, go to a Plattsburgh shopping mall, buy stuff you need, come back to Quebec without declaring anything.  No taxes.
  
• Mail order: make sure your stuff crosses the border somewhere in Ontario.  Only GST will be charged (5%), no PST.
  
• Black market.  Drugs aren't taxed.  Illegal booze is not taxed. Indian cigarettes are not taxed.  Renovating your house and paying in cash will not be taxed.
  
• Personal expenses on the company's account.  Declare yourself "autonomous worker".  Deduct a part your home phone bill, electricity bill, and buy yourself computers & softwares you need.  No tax.
  
• etc, etc
  

There's no good way to have a real progressive tax system with only VAT, nor with only income tax, and neither way will help a governement really eliminate tax evasion.

It's not a bad tax, but it's not a good tax either.  In fact, there are no good taxes :P

Quote from: Martinus on April 23, 2010, 08:26:58 AM
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 :shifty:
You need to make a step in the real world Marty.

Quote from: DGuller on April 23, 2010, 08:31:55 AM
Isn't VAT structured in such a way that everyone has incentives to be honest (unlike the sales tax, where foregoing it can be a competitive advantage)?

duh?  what kind of statement is that?
No one ever asked us to pay in cash (unions excluded) before the government came in with their stupid sales tax of 15%.

Quote from: grumbler on April 23, 2010, 08:51:23 AM
I think a lot of people fail to understand this, and thus fail to comprehend the difference between sales taxes and VAT.  Your point is, I think, correct.

Edit:  DG beat me to this point.

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.

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.

Quote from: grumbler on April 23, 2010, 11:58:37 AM
Because the import duties will be 30-40%, and so no one will use your service.

You could try smuggling, of course, but any tax system results in some smuggling or other tax evasion.

NAFTA&EU.  No import duties for most goods inside these zones.  And multiple bilaterals agreement with governments.

Reconstructed cars.  Buy a wreck from the US (say, a flooded car from Louisiana or California) for 10% of the price.  Have the car reconstructed for 20 000$ more.  Pay the tax on your 5000$ bill, the official value of the car.

No import duties.  No tax on 15k$.

Buy a... "work of art".  The price can not be determined precisely, most of the time.  Value is in the eye of the beholder.  Have the artist declare a token value, pay VAT on this value only. 
Sell the work of art a few years later, and you have no capital gains taxes on these type of goods.
http://ca.answers.yahoo.com/question/index?qid=20100206195928AA954TB

Quote from: viper37 on April 23, 2010, 02:46:20 PM
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.

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.

Quote from: viper37 on April 23, 2010, 02:46:20 PM
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?)

QuoteAlthough 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

QuoteIf 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

Quote from: Sheilbh on April 23, 2010, 03:23:10 PM
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.

Quote from: grumbler on April 23, 2010, 04:25:12 PM
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.

Quote
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.

QuoteDo 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. 

QuoteVehicles 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.

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.

Quote from: viper37 on April 23, 2010, 02:41:34 PM

Quote from: Martinus on April 23, 2010, 08:26:58 AM
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 :shifty:
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.

Quote from: Tamas on April 25, 2010, 02:39:29 AM
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).

Quote from: viper37 on April 24, 2010, 02:16:09 PM
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.

QuoteWhat 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?

QuoteA 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.

Quote from: Tamas on April 25, 2010, 02:39:29 AM
I haven't read grumbler's argument over the holy nature of the VAT.

Nor have I!   :lol:

Quote from: Martinus on April 25, 2010, 03:13:29 AM


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.

Quote from: Martinus on April 25, 2010, 03:13:29 AM
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 :)

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

not a fact.

QuoteHowever, VAT evasion is easier to spot,

nope.  Just as hard to spot.

Quote
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.

Quote
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.

Quote from: grumbler on April 25, 2010, 08:32:09 AM
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.

Quote
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.

Quote from: MadImmortalMan on April 26, 2010, 11:34:40 AM
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.

Quote from: viper37 on April 26, 2010, 12:16:18 PM
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?

Quote from: Valmy on April 23, 2010, 08:22:14 AM
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.

Quote from: MadImmortalMan on April 26, 2010, 12:19:47 PM
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.

Quote from: MadImmortalMan on April 26, 2010, 12:19:47 PM
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?

Let's say he paid 50$ for it and sells it for 55$.  He pays taxes on 5$ in reality.  Where as if you sold the good for 100$ (the costs of your good, your services and the profit), the government would make 2,25$ in taxes instead of 0,25$.

Quote from: Valmy on April 23, 2010, 08:22:14 AM

Quote from: Threviel on April 23, 2010, 01:40:39 AM
Only every twentieth man.

And I forgot, the employer pays about 30% of my salary as an employers fee to the state.

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

Threviel is not giving you the full picture.

The employer's fee is almost entirely composed of various social fees, f.ex. pension fees. For the benefit of the employed. It is paid by the employer and not by the employee. So it can be paid with untaxed money. Rather than be paid by the employee with taxed money.

Quote from: Pat on April 27, 2010, 09:29:56 PM
Threviel is not giving you the full picture.

The employer's fee is almost entirely composed of various social fees, f.ex. pension fees. For the benefit of the employed. It is paid by the employer and not by the employee. So it can be paid with untaxed money. Rather than be paid by the employee with taxed money.

Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

Quote from: Admiral Yi on April 28, 2010, 10:02:01 AM
Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

That depends on the type of pension, of course.  There are pension schemes that work each way.

Quote from: Admiral Yi on April 28, 2010, 10:02:01 AM

Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

I don't agree with that at all. Private pensions have the liaibility calculated for future retirees, and need to keep funding levels to meet those requirements based on discount rates and estimated investment gains. If you were to start a new retirement plan only available for current workers, you would be required to make contributions even if you didn't have any retirees.

Quote from: alfred russel on April 28, 2010, 10:18:29 AM
I don't agree with that at all. Private pensions have the liaibility calculated for future retirees, and need to keep funding levels to meet those requirements based on discount rates and estimated investment gains. If you were to start a new retirement plan only available for current workers, you would be required to make contributions even if you didn't have any retirees.

Sorry if it wasn't crystal clear I was talking about Thrievel's pension contribution.

Quote from: alfred russel on April 28, 2010, 10:18:29 AM

Quote from: Admiral Yi on April 28, 2010, 10:02:01 AM

Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

I don't agree with that at all. Private pensions have the liaibility calculated for future retirees, and need to keep funding levels to meet those requirements based on discount rates and estimated investment gains. If you were to start a new retirement plan only available for current workers, you would be required to make contributions even if you didn't have any retirees.

In a defined-contribution plan, you are correct.  In a defined-benefit plan, though, the company would be managing the pension plan and would take excess contributions as income (while making up for deficient contributions later on).  You don't see many defined-benefit plans any more, so your assumption that any given plan will be defined-contribution is probably warranted.

Quote from: Admiral Yi on April 28, 2010, 10:27:32 AM
Sorry if it wasn't crystal clear I was talking about Thrievel's pension contribution.

I don't think he is talking about pension contributions when he says "the employer pays about 30% of my salary as an employers fee to the state."  I also don't think that this is an employer's fee, but sounds to me more like unemployment compensation, social security-type payments, and the like.  Which, as you note, are not designed to be saved for the use of the contributor.

Quote from: grumbler on April 28, 2010, 10:28:58 AM

Quote from: alfred russel on April 28, 2010, 10:18:29 AM

Quote from: Admiral Yi on April 28, 2010, 10:02:01 AM

Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

I don't agree with that at all. Private pensions have the liaibility calculated for future retirees, and need to keep funding levels to meet those requirements based on discount rates and estimated investment gains. If you were to start a new retirement plan only available for current workers, you would be required to make contributions even if you didn't have any retirees.

In a defined-contribution plan, you are correct.  In a defined-benefit plan, though, the company would be managing the pension plan and would take excess contributions as income (while making up for deficient contributions later on).  You don't see many defined-benefit plans any more, so your assumption that any given plan will be defined-contribution is probably warranted.

I was talking about a defined benefit plan. It isn't common to call a defined contribution plan a pension.

In your typical defined benefit plan, you don't take excess contributions into income, you just don't make them. You also have to keep minimum funding levels under ERISA.

Quote from: alfred russel on April 28, 2010, 10:43:57 AM
I was talking about a defined benefit plan. It isn't common to call a defined contribution plan a pension.

In the US it is pretty common, though.  There are generally considered to be two types of pensions in the US:  defined benefit and defined contribution.  YMMV.

Quote from: grumbler on April 28, 2010, 11:26:04 AM

Quote from: alfred russel on April 28, 2010, 10:43:57 AM
I was talking about a defined benefit plan. It isn't common to call a defined contribution plan a pension.

In the US it is pretty common, though.  There are generally considered to be two types of pensions in the US:  defined benefit and defined contribution.  YMMV.

I'm not going to argue it, but I'm in the US. I haven't heard people refer to a 401k as a pension plan, and part of my job is to work with benefit plans.

Quote from: Admiral Yi on April 28, 2010, 10:02:01 AM
Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

It definitely shouldn't work that way for private pension funds.  Private pension funds should be fully funded, not pay-as-you-go.  Only when you get to the level of Social Security can you get away with pay-as-you-go system.

 :frusty:

Quote from: DGuller on April 28, 2010, 11:44:44 AM

Quote from: Admiral Yi on April 28, 2010, 10:02:01 AM
Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

It definitely shouldn't work that way for private pension funds.  Private pension funds should be fully funded, not pay-as-you-go.  Only when you get to the level of Social Security can you get away with pay-as-you-go system.

I think the Japanese found out that isn't actually true.

And the US is going to find that out as well - actually, we already know it.

Quote from: Berkut on April 28, 2010, 11:49:59 AM

I think the Japanese found out that isn't actually true.

And the US is going to find that out as well - actually, we already know it.

The ERISA rules don't make you fund 100%, plus they allow you to assume a rate of return on assets which is usually in the 8% range. So if you started 10 years ago with a plan that was already a bit underfunded, and assumed you would get 8% annual returns compounding over the 10 years when you actually got 0%, you end up with a severe underfunded status. ERISA requires catch up contributions, but there is only so much they require without pushing companies into bankruptcy. This is a big problem for our company, and we discontinued our plan a while ago.

Quote from: alfred russel on April 28, 2010, 11:34:02 AM

Quote from: grumbler on April 28, 2010, 11:26:04 AM

Quote from: alfred russel on April 28, 2010, 10:43:57 AM
I was talking about a defined benefit plan. It isn't common to call a defined contribution plan a pension.

In the US it is pretty common, though.  There are generally considered to be two types of pensions in the US:  defined benefit and defined contribution.  YMMV.

I'm not going to argue it, but I'm in the US. I haven't heard people refer to a 401k as a pension plan, and part of my job is to work with benefit plans.

I'm going to side completely with AR on this one.  I've never seen pension being used in ways other than to refer to defined benefit plans.  However, the actuarial perspective may be biased, since actuaries are not needed for defined contribution plans.

Quote from: Berkut on April 28, 2010, 11:49:59 AM
I think the Japanese found out that isn't actually true.

And the US is going to find that out as well - actually, we already know it.

I didn't say that you're guaranteed to get away with it.  Theoretically, government social programs don't necessarily need to be funded to last indefinitely.

Quote from: alfred russel on April 28, 2010, 11:34:02 AM
I'm not going to argue it, but I'm in the US. I haven't heard people refer to a 401k as a pension plan, and part of my job is to work with benefit plans.

I have never heard anyone refer to a 401k plan as a pension, either.  Nor an IRA, nor a 403(b).  Is anyone saying that these are pension plans?  If so, i haven't heard it.

If you are arguing that you nave never heard of a defined-contribution retirement plan that is not a 401(k), and you deal with benefit plans, you should educate yourself.  There are several types of IRAs, there are 403(b) plans, and there are pensions that are defined-contribution plans.

Quote from: Sheilbh on April 23, 2010, 01:22:25 PM
This isn't just Obama - though I'm impressed he's mentioned it.  I've read a huge number of arguments from tax professionals since I started my new job that basically say the US should adopt a VAT and some people predict that as globalisation increases and high-earners, like companies, can increasingly move around to choose a tax liability that personal income tax will move the way of corporate income tax. 

The problem of personal mobility is not so much an issue for the US b/c the US is one of the few countries that tax citizens regardless of their place of residence or source of income.   An American can only tax arbitrage by renouncing citizenship.

Also I think the problem is exaggerated (and I note your source being "tax professionals" is not entirely without bias).  On the margins, there will always be some high earners who will tax arbitrage.  But there are practical limitations.  Not everyone can (much less want to) live 183 days out the year in Andorra, or Zug, or the Rock of  Gibraltar.  It does sometimes happen with fashion models, or certain sports figures, a handful of rentiers, and your odd hedge fund manager.  But it is far from the inevitable drain on the fisc that alarmists might claim. 

Quote from: The Minsky Moment on April 28, 2010, 01:05:40 PM
The problem of personal mobility is not so much an issue for the US b/c the US is one of the few countries that tax citizens regardless of their place of residence or source of income.   An American can only tax arbitrage by renouncing citizenship.

This is true. Only other country I can think of is China, though a few require Social Security contributions from overseas workers.

QuoteAlso I think the problem is exaggerated (and I note your source being "tax professionals" is not entirely without bias).  On the margins, there will always be some high earners who will tax arbitrage.  But there are practical limitations.  Not everyone can (much less want to) live 183 days out the year in Andorra, or Zug, or the Rock of  Gibraltar.  It does sometimes happen with fashion models, or certain sports figures, a handful of rentiers, and your odd hedge fund manager.  But it is far from the inevitable drain on the fisc that alarmists might claim.

You're right.  Though I think this could be more of a problem in countries like the UK and, at the moment, India that I think have a common law definition of residence meaning you can avoid taxes more easily than in a country that's got relatively straight forward residence requirements. 

The other point is that one of the successes of the past year's been far greater adoption of tax treaties by a lot of tax havens.  I didn't think the French push for a crackdown on tax havens would amount to much but from what I've read - and the rate at which treaties seem to be being signed is actually really rather impressive.

Quote from: Sheilbh on April 28, 2010, 06:38:26 PM
The other point is that one of the successes of the past year's been far greater adoption of tax treaties by a lot of tax havens.  I didn't think the French push for a crackdown on tax havens would amount to much but from what I've read - and the rate at which treaties seem to be being signed is actually really rather impressive.

The tax havens are feeling the squeeze from all sides with the Germany and US Justice Department joining the fray in a big way.  The UK under Brown has also been aggressive lately for the very reasons you mentioned.

Quote from: The Minsky Moment on April 28, 2010, 07:26:17 PM

Quote from: Sheilbh on April 28, 2010, 06:38:26 PM
The other point is that one of the successes of the past year's been far greater adoption of tax treaties by a lot of tax havens.  I didn't think the French push for a crackdown on tax havens would amount to much but from what I've read - and the rate at which treaties seem to be being signed is actually really rather impressive.

The tax havens are feeling the squeeze from all sides with the Germany and US Justice Department joining the fray in a big way.  The UK under Brown has also been aggressive lately for the very reasons you mentioned.

What leverage do the big countries have against Caribbean islands that don't give a shit about them, and like having billionaires living on them to escape the taxes?

Quote from: DGuller on April 28, 2010, 07:29:56 PM
What leverage do the big countries have against Caribbean islands that don't give a shit about them, and like having billionaires living on them to escape the taxes?

Anything from imposing giant withholding taxes on all foreign source income to seizing overseas assets.  Or putting them on lists of terrorist funding sources. 

And the majors can afford to wait the tax havens out, thanks to melting ice sheets.

Quote from: DGuller on April 28, 2010, 07:29:56 PM
What leverage do the big countries have against Caribbean islands that don't give a shit about them, and like having billionaires living on them to escape the taxes?

Enough that all of the countries that were on the OECD's blacklist have no moved to the white list (minimum number of double taxation treaties and enhanced exchange of information laws in effect) or the grey list (the above but not fully implemented).  The G20 have discussed measures to take on countries that the OECD believe are dragging their feet or not cooperating with minimum exchange of information standards.  Not least for the legitimate reasons JR brings up.

Tax havens create international competition to keep taxes from getting too high. They should be protected, not sanctioned.

Quote from: MadImmortalMan on April 29, 2010, 07:57:08 PM
Tax havens create international competition to keep taxes from getting too high. They should be protected, not sanctioned.

Tax havens are parasitical free riders on the international state and financial system.  Like most parasites, they are tolerable until they start getting too big and numerous.

The way to keep taxes low is for people to insist on lower taxes (and thus lower spending).  If people choose otherwise, that is democracy in action. 

Democrazy doesn't work and I think we all know it.

If I have to pay 20% on my burrito, I'm going to kick a European in the nuts.

Quote from: MadImmortalMan on April 29, 2010, 07:57:08 PM
Tax havens create international competition to keep taxes from getting too high. They should be protected, not sanctioned.

I don't think they've a great deal to do with the general move towards broader based taxation at lower rates.  I mean the EU is an example.  In the EU 15, I think the past 20 years has seen average corporate income tax rates fall by 1% - that was largely started by Ireland cutting corporate tax to 20% (it's now 12.5%).  Right now New Zealand's worrying about her tax rates being too high, not for fear of Nauru but Australia.  Personally I suspect perceived quality of governance matters more than tax rates in terms of investment.

Similarly the majority of tax cuts in the West in the past few years have been to do with reducing the top rate of tax.  While tax havens are a worry, most people in those brackets moving abroad will be going to similar sorts of developed countries.  It's as much a concern about a brain drain as tax evasion that's forced those rates down.

Edit:  Incidentally the problem with tax havens isn't the low rates - no one wants Switzerland or Hong Kong to increase their tax rates - it's the secrecy and unwillingness to adhere to minimum international standards that allows, in the recent UBS case, massive law-breaking to go on.  The G20 want them to sign exchange of information deals and some number of tax treaties, not increase their rates.