The Folly of Loopholes and Complex Tax Codes

[Hazir]

I think the real issue with complexity here is not that it's complex on the part of the of the final merchants (although it can be). Rather, the Byzantine rules require a large bureaucratic infrastructure to create, maintain, and enforce. Furthermore, large changes in effective tax rates for substantially similar products (e.g. bras of slightly different sizes; sandwiches packaged/sold one way vs. another) encourages evasion and behavior modification, which is rarely the point of the tax. Lastly, even if a computer automatically figures out how much tax to pay for a given transaction, the computers need to be programmed, and frequently updated (given the fairly common changes to tax code) - this is an expensive proposition. In fact, in supply chains there's an enormous paperwork burden that falls on industry. Sure, they may have an incentive to do the paperwork since each supplier effectively enforces the previous one in the chain, but even if they don't stoop to avoidance it's still a significant drain on resources.

VAT in Europe is actually not considered complicated at all. It has some appearantly strange effects on the consumer side (but as Randblade already pointed out, trying to fix them would cause the system to be more complicated rather than simpler). What is more important; the companies in the middle can 'pay' their taxes without ever sending a single cent to the tax-office.

[Hazir]

I've always divided meals first in terms of:

A. what was prepared in my kitchen

vs.

B. what was prepared in a restaurant kitchen.

From there I would divide B into:

-B1. Restaurant food that I brought home to eat in my dining room (aka "carryout").

vs.

-B2. Restaurant food that I consumed in the restaurant's dining room. (aka "dine in")

My state charges a flat sales tax on all food bought from a restaurant but not food purchased in a grocery store. So if I buy a sandwhich at Subway I get it with a flat 6% tax on the purchase regardless if its toasted, cold, eaten there or taken home. But, if I go to the local grocery store and I buy a pre-made sandwhich in the deli section, I will pay no sales tax on it.

And that's not how VAT differentiates. It differentiates between the basic good and the good after value is added (in whatever form or shape). That's not coincidentally the name of the tax too Value Added Tax. It's not called a 'restaurant' tax.

[EyeKhan]

And that's not how VAT differentiates. It differentiates between the basic good and the good after value is added (in whatever form or shape). That's not coincidentally the name of the tax too Value Added Tax. It's not called a 'restaurant' tax.

Note - I edited quite a bit above. Not sure if anything that changed makes any difference to this comment though.

So is heating my sandwich at subway adding value that isn't there if I eat the sandwhich cold? How is value determined? Anything done to something that costs money?

ALSO: Is eating in a restaurant dining room adding value to your meal vs. taking it to the comfort of your own home?

[GGT]

I don't get it. Sounds like a tax on labor. I can buy whole bagels made at the grocery bakery, or pre-sliced ones from their vendors. Are they taxed differently at check-out? I can buy a frozen grocery store pizza or a half-baked one, or go to Domino's and pick it up ready-to-eat, but not sit in their facility to eat it. Are they taxing pizzas differently, too?

[Flixy]

But did you pass along the tax to each customer on an order-by-order basis or did the bar eat the tax as a cost?

I don't follow. Of course customers paid for the tax, it's included in the price. What on earth do you mean? Keep in mind all prices here are always including taxes, you pay what's on the menu in this case. So we simply set the price for our drinks, and the customer doesn't care less if it's the 6% or 19% VAT. Only business supplies tend to list prices excluding VAT, since businesses can reclaim their VAT anyway.

Interesting since he shows at every turn that he doesn't understand at all how VAT works. I think that if you ask the average business person in the EU about administrative burden you will find that the VAT ranks very low on the list of complaints.

VAT is, at least over here, incredibly easy. Payroll taxes are much more annoying.

There also seems to be the idea that there is a long, complicated list of exemptions. That's not true, it's a very short, and usually very clear list:

http://www.belastingdienst.nl/variab...l#P4047_157385

[EyeKhan]

I don't get it. Sounds like a tax on labor. I can buy whole bagels made at the grocery bakery, or pre-sliced ones from their vendors. Are they taxed differently at check-out? I can buy a frozen grocery store pizza or a half-baked one, or go to Domino's and pick it up ready-to-eat, but not sit in their facility to eat it. Are they taxing pizzas differently, too?

I think the half-baked pizza is perfect for you.

[GGT]

I think the half-baked pizza is perfect for you. :P

Hey now! You've got to admit, between the tax for sliced bagels in NYC and Rand's post, it's confusing.

That sounds very similar to VAT in the UK.

Raw food is an "essential" and has no VAT on it.
Cooked food is a "luxury" and has 17.5% VAT (20% VAT from Jan) on it.

Going shopping and taking food home is an "essential" and has no VAT on it.
Eating out is a "luxury" and has 17.5% VAT (20% VAT from Jan) on it.

Combined these come to sometimes some odd situations.

Go to Subway and order a ham sub with salad to take away and it'll be VAT-free (despite being prepared, its cold and taken away. Get it toasted or eat it in and VAT is chargeable. Go to Starbucks and buy a muffin and it'll have two prices on it, one for eating in and another for take away. When I was little I used to think shops were charging for the priviledge of eating in and found that rather mean. Go to Domino's and order a pizza and it will always be charged VAT as it was cooked, but a dessert may be VAT-free.

The rules are more complex than just that though as to which items are luxuries or essentials, leading to debates as to eg is a Kit-Kat a biscuit or chocolate? One has VAT the other doesn't.

Dare I ask how UK taxes half-baked pizzas?

[EyeKhan]

Hey now! You've got to admit, between the tax for sliced bagels in NYC and Rand's post, it's confusing.

Its the tax code.

[wiggin]

VAT in Europe is actually not considered complicated at all.

Uhm, source?

It has some appearantly strange effects on the consumer side (but as Randblade already pointed out, trying to fix them would cause the system to be more complicated rather than simpler). What is more important; the companies in the middle can 'pay' their taxes without ever sending a single cent to the tax-office.

The fixes can be much easier if you eliminate all exceptions and loopholes and classifications in favor of a flat VAT which is offset by increase income tax credits for lower earners.

[Nessus]

Uhm, source?

o/

[RandBlade]

Why are Subway's sandwiches different to WalMart's sandwiches?

Trying to phrase something by law if I'm the taxman then if the law states "what was prepared" then is a loaf of bread prepared? It's arguably been cooked somewhere else in preparation and is not plain raw ingredients (which would be the wheat etc)

PS Subway's under British law are not classed as a restaurant and do not need Planning Permission (which a restaurant normally does). Because they're designated as a deli.

[Hazir]

Uhm, source?


The fixes can be much easier if you eliminate all exceptions and loopholes and classifications in favor of a flat VAT which is offset by increase income tax credits for lower earners.

Source; knowledge about how it works and having a bunch of people with small and big enterprises in my family and circle of friends who bitch without end about rules and regulations but never about VAT. It's also funny that you assume it's possible to give a source for the fact that people don't complain about its percieved (by americans) complexity. For businesses it's great that they reclaim the VAT they paid from the VAT they collected. Effectively meaning they pay taxes with a closed purse for a good deal of the time.

And why should we fix a problem we don't have? The only problem we have is that Americans confuse VAT with a sales-tax.

May I also point out that the only two Europeans who deal with VAT in their job don't think VAT is complicated at all ?

[RandBlade]

So is heating my sandwich at subway adding value that isn't there if I eat the sandwhich cold?

No, Value Added is there, its just a case of the tax rate for cold food being zero.

How is value determined? Anything done to something that costs money?

Simplified: Cost of sale - Cost of Goods Sold. Its pretty much how GDP is measured too.

However what will happen in practice is lets say a Sub costs £3 then its its taxed then with 17.5% tax rate, 15% of the price will be tax (45p). Since its about added value, Subway would be able to reclaim the VAT they've paid to their suppliers out of that. However ironically since the food they'd bought was raw they'd have paid no VAT for that. They might have paid VAT for the paper wrapping, bags, etc and could claim that back out of the 45p

ALSO: Is eating in a restaurant dining room adding value to your meal vs. taking it to the comfort of your own home?

NO!!!

The value is added no matter what. The difference is political not economic. Cold food taken home has added value, but a value added tax rate of 0%

If Hazir and I agree on anything that should normally mean something . VAT is dead simple to implement and my major grumble about VAT is tax evasion. We don't evade VAT on any of our goods, I know some competitors do though meaning they can charge less than us. You get tax evasion for most taxes though.

[RandBlade]

I think the real issue with complexity here is not that it's complex on the part of the of the final merchants (although it can be). Rather, the Byzantine rules require a large bureaucratic infrastructure to create, maintain, and enforce.

I agree with making taxes less Byzantine. I think VAT is less Byzantine than most taxes though.

Furthermore, large changes in effective tax rates for substantially similar products (e.g. bras of slightly different sizes; sandwiches packaged/sold one way vs. another) encourages evasion and behavior modification, which is rarely the point of the tax.

Agreed. You get tax evasion in many taxes again though, eg paying cash in hand to evade payroll tax is another hate of mine. Another reason I like computerised systems and cards rather than cash, reduces the scope for the black economy.

Lastly, even if a computer automatically figures out how much tax to pay for a given transaction, the computers need to be programmed, and frequently updated (given the fairly common changes to tax code) - this is an expensive proposition.

Frequently updated? I've been with the same company for nearly six years now and in that time I've never seen the computer program reprogrammed for that! Or the tax code changed. The tax rate was changed at the start of the recession, changed again a year later and will be changed a third time soon. That's all due to politics though and is a case of changing percentages and numbers with a rate change, not changing programming.

In fact, in supply chains there's an enormous paperwork burden that falls on industry. Sure, they may have an incentive to do the paperwork since each supplier effectively enforces the previous one in the chain, but even if they don't stoop to avoidance it's still a significant drain on resources.

Not sure its as much of a paperwork burden than other taxes.

I can imagine without computers and/or proper accounting systems there'd be issues - but again most taxes would be affected by that.

[Flixy]

I can imagine without computers and/or proper accounting systems there'd be issues - but again most taxes would be affected by that.

If you use any half decent accounting software, which is useful for yourself, it automatically calculates the VAT stuff. No extra work at all.

[wiggin]

Source; knowledge about how it works and having a bunch of people with small and big enterprises in my family and circle of friends who bitch without end about rules and regulations but never about VAT. It's also funny that you assume it's possible to give a source for the fact that people don't complain about its percieved (by americans) complexity. For businesses it's great that they reclaim the VAT they paid from the VAT they collected. Effectively meaning they pay taxes with a closed purse for a good deal of the time.

So, in other words, hearsay.

And why should we fix a problem we don't have? The only problem we have is that Americans confuse VAT with a sales-tax.

I am most definitely not making that mistake.

I agree with making taxes less Byzantine. I think VAT is less Byzantine than most taxes though.

I think it depends on the country in question (and the complexity of their income tax code), but stories like this make me somewhat skeptical that VAT is somehow simpler than other systems.

Please note I'm not advocating for eliminating or not considering a VAT because it is by nature more complex than another tax system - e.g. income tax, sales tax, etc. I just think that in a good-faith effort to make the tax 'fairer', most governments add a pretty ridiculous set of regulations that should be largely eliminated. Get rid of all of the exemptions and the system would work pretty well - and due to the special nature of VAT, it would probably be superior to a sales tax in terms of evasion and the like. On the other hand, accounting requirements for sales taxes are lower (only at the end sale), so I imagine appropriately structured systems either way would have advantages.

Frequently updated? I've been with the same company for nearly six years now and in that time I've never seen the computer program reprogrammed for that! Or the tax code changed. The tax rate was changed at the start of the recession, changed again a year later and will be changed a third time soon. That's all due to politics though and is a case of changing percentages and numbers with a rate change, not changing programming.

It's not just rates that change (and those change pretty frequently in my reading, though that might be a sample bias for the recession). That being said, tax policy wrt exemptions and the like also changes frequently, at least in the UK:

http://www.hmrc.gov.uk/briefs/vat/index.htm

It might be that your particular business hasn't seen much of these particular changes, but that's irrelevant to the greater question of tax simplicity. (Again, remember, I don't think the IRS is any better, and state sales tax laws can also be complex.)

Not sure its as much of a paperwork burden than other taxes.

This one I'd really disagree with. In a sales tax (which is the traditional comparison), only the final seller needs to deal with the tax. In a VAT, every step of the supply chain has to worry about it - both paying the tax and getting most of it back from the previous step. That's a lot of added administrative overhead that most parts of a supply chain don't have to worry about in other systems. Other corporate taxes can be complicated, but they don't require the same set of data and tracking, meaning that there's little redundancy in their administration.

[Hazir]

The VAT system is exactly the same in all EU states (basic tariff for all goods and services, unless they are placed in a lower class). As far as the complexity of the system is concerned for businesses it's (total) VAT collected - (total) VA paid = VAT payable. There is nothing difficult about it at all. Just basic bookkeeping and knowing which percentage is applicable on which transaction.

My hearsay still trumps your assumption of complexity. Your links are not changes to the system, they merely set out how the rules work in specific situations.

[wiggin]

The VAT system is exactly the same in all EU states (basic tariff for all goods and services, unless they are placed in a lower class). As far as the complexity of the system is concerned for businesses it's (total) VAT collected - (total) VA paid = VAT payable. There is nothing difficult about it at all. Just basic bookkeeping and knowing which percentage is applicable on which transaction.

The point is 'basic' bookkeeping take time and resources to track VAT collections and payments - and categorization of each item based on its use. It's not difficult in principle (assuming rules aren't changing), but it is an administrative overhead that isn't necessarily the best way to collect taxes. For that matter, most of tax law isn't difficult in principle, it just requires added levels of record-keeping and a firm grounding in the relevant tax law.

Your mentioning of a similarity of VAT rules across EU states brings up another good point - that whole mess with international goods and getting VAT refunded in certain cases. That's a royal pain in the butt.

My hearsay still trumps your assumption of complexity. Your links are not changes to the system, they merely set out how the rules work in specific situations.

I'm not assuming anything. My link that doesn't have 'changes in the system' had this as its second brief (released a few weeks ago):

VAT: changes to the exclusion of the option to tax on supplies of buildings to be used solely for a relevant residential or relevant charitable purpose, (paragraphs 5, 6 and 7 of Schedule 10 to the VAT Act 1994 refer)

In Revenue & Customs Brief 39/09, HM Revenue & Customs (HMRC) announced changes to the application of the zero rate to new buildings and that, following a review, the phrase 'solely for a relevant residential or relevant charitable purpose' could incorporate a de minimis margin.

In order to avoid unnecessary disputes in marginal cases, HMRC accept that this statutory condition is satisfied for new buildings where the relevant use of the building by the charity or relevant residential user is 95 per cent or more. In light of this review, HMRC announced the withdrawal of Extra Statutory Concession (ESC) 3.29 and two related concessions as we considered them to be no longer necessary or appropriate.

However, ESC 3.29 also allowed charities to exclude the option to tax on supplies of buildings to them (other than parts used as an office) if they were solely used for a relevant charitable purpose. For consistency, HMRC accept that, where the customer and supplier agree, the option to tax can be excluded on supplies of a building or part of a building that is to be used 95 per cent or more for a relevant purpose in the following situations:

* where a building or part of a building (other than used as an office) will be used by a charity solely for a relevant charitable purpose (paragraph 7 of Schedule 10 to the VAT Act 1994 refers)
* where a grant is made in a building or part of a building designed solely for a relevant residential purpose (paragraph 5 of Schedule 10 to the VAT Act 1994 refers)
* where a grant in a building or part of a building is made to a person who intends to use the building solely for a relevant residential purpose (paragraph 6 of Schedule 10 to the VAT Act 1994 refers)

Simple my ass. The first link is even worse, dealing with some mess of how VAT applies to emissions trading schemes. In 2009, there was a new brief released about every three days.

Look at the list of UK exemptions and start to realize how careful you need to parse what applies and what doesn't for each:
http://www.hmrc.gov.uk/vat/forms-rat...s-services.htm

[Dreadnaught]

Interesting since he shows at every turn that he doesn't understand at all how VAT works. I think that if you ask the average business person in the EU about administrative burden you will find that the VAT ranks very low on the list of complaints.

What ranks higher? And what kinds of businesses are we talking about? Because it seems like a simple take-out place is subject to a dizzying array of different taxes on different products. Assuming two business environments that have the same regulations, but one uses a VAT and one has a business income tax, the business income tax seems a lot more straight forward.

Speaking of which...

Computer does it all for me. Is a good VAT-chargeable? If yes: Charge VAT. If no: Don't. Done.

As Wiggin pointed out, isn't requiring a separate computer program to price and track all of this a major burden? It seems to be especially burdensome on cash-only businesses. I don't see how my local pizza place (or, for that matter, my local bagel place) could operate in such an environment.

What is more important; the companies in the middle can 'pay' their taxes without ever sending a single cent to the tax-office.

Can you elaborate? I don't follow.

I don't follow. Of course customers paid for the tax, it's included in the price. What on earth do you mean? Keep in mind all prices here are always including taxes, you pay what's on the menu in this case. So we simply set the price for our drinks, and the customer doesn't care less if it's the 6% or 19% VAT. Only business supplies tend to list prices excluding VAT, since businesses can reclaim their VAT anyway.

My mistake, I misunderstood what you were describing.

There also seems to be the idea that there is a long, complicated list of exemptions. That's not true, it's a very short, and usually very clear list:

http://www.belastingdienst.nl/variab...l#P4047_157385

I think the idea here is that there can be a long, complicated list of exceptions. As I've pointed out before, your society is relatively small and "uncluttered" in this arena. But in many places, the ability to get an exception is just begging for a special interest group to carve one out for themselves.

Even in that list you posted, why are "ornamental plants" subject to a lower rate? Why are all meats besides beef subject to the lower 6% rate?

Why are financial services exempt from VAT?

Even in those small areas of exception/lower rates, it seems like some industries have gotten themselves a distinct advantage by getting a reduced/eliminated VAT.

[Flixy]

Err, all food is subject to the lower rate. And if you are talking about the actual animals, they fall under cattle. Don't know why the financial services are exempt, probably to make it attractive for banks to operate? Or possibly to keep costs down for all industries, I only encountered that one with transaction fees myself. And I don't see why you'd need a computer to 'price' things It's not hard to set a price, you know. And any business keeps his books anyway, simply deduct the appropriate amounts of tax from sales, and do the same for what you bought.

The entire tax form consists mainly of three things you have to fill in: how much you sold in the 19% catagory, how much you sold in the 6% catagory, and how much VAT you have paid yourself to suppliers. That's all.

[Ominous Gamer]

As Wiggin pointed out, isn't requiring a separate computer program to price and track all of this a major burden? It seems to be especially burdensome on cash-only businesses. I don't see how my local pizza place (or, for that matter, my local bagel place) could operate in such an environment.

I don't see how this is true. Unless you're talking about the most basic form of mom and pop, hole in the wall, under the radar, type of business, they have something that tracks tax for them; if you are talking about those types of businesses, being precise on how many cut bagels they sell isn't exactly job 1. Operating a business almost requires the use of a 3rd party of somesort to do this for them, it wouldn't exactly be hard to use either. A business that knows how to track its inventory already has all its stock assigned a keycode, and thats all the employees have to know. Fuck, half the time the codes are taped to the register A database assigns keycode 2342 a 7% tax, and keycode 6732 no tax.
How else would businesses be able to take part when the tax system changes; everything from weekend school tax holidays, to expiring or new tax increases/decreases.

[Hazir]

The point is 'basic' bookkeeping take time and resources to track VAT collections and payments - and categorization of each item based on its use. It's not difficult in principle (assuming rules aren't changing), but it is an administrative overhead that isn't necessarily the best way to collect taxes. For that matter, most of tax law isn't difficult in principle, it just requires added levels of record-keeping and a firm grounding in the relevant tax law.

Your mentioning of a similarity of VAT rules across EU states brings up another good point - that whole mess with international goods and getting VAT refunded in certain cases. That's a royal pain in the butt.


I'm not assuming anything. My link that doesn't have 'changes in the system' had this as its second brief (released a few weeks ago):

Simple my ass. The first link is even worse, dealing with some mess of how VAT applies to emissions trading schemes. In 2009, there was a new brief released about every three days.

Look at the list of UK exemptions and start to realize how careful you need to parse what applies and what doesn't for each:
http://www.hmrc.gov.uk/vat/forms-rat...s-services.htm

Nothing complicated about that, it just an administrative rule that tells people how they can give evidence in order to have their building included in the exemption for charities.

It doesn't change anything about the VAT itself.

It's really hilarious how you keep insisting that VAT is overly complicated where the only two people who actually deal with it in this topic deny that it is. Even if their evidence would only be anecdotal, you're still coming off as an ass.

And again, you seem to be unable to grasp that in reality the 'refunding' of VAT happens with little to no money actually changing in or out of the coffers of the tax-office. The 'refunding' in reality consists of account that tells the tax-office 'this money I collected in VAT is mine and thus I will keep it'.

[Khendraja'aro]

It's really hilarious how you keep insisting that VAT is overly complicated where the only two people who actually deal with it in this topic deny that it is. Even if their evidence would only be anecdotal, you're still coming off as an ass.

Uh, VAT isn't overly complicated? Right, so the groups in Germany who aim at a overhaul of the German system are merely an illusion, then. One of those groups is the Federal Court of Audit, by the way.

[wiggin]

Nothing complicated about that, it just an administrative rule that tells people how they can give evidence in order to have their building included in the exemption for charities.

It doesn't change anything about the VAT itself.

Uhm, you're wrong. The brief I quoted was changing the rules for which buildings/etc. used for charitable purposes would be tax exempt (in this case, expanding the definition to include so-called 'marginal' cases). I specifically chose that one because it was ridiculous - I understand they were trying to reduce tax disputes over this issue for 'marginal' cases, but I can't imagine that it affects that many cases (how many buildings are used 95% for charities and not 100%?) - in the end, the time it took formulating the policy, and the time it took charities to figure out what the hell it meant and whether it applied to them was entirely wasted.

It's really hilarious how you keep insisting that VAT is overly complicated where the only two people who actually deal with it in this topic deny that it is. Even if their evidence would only be anecdotal, you're still coming off as an ass.

I apologize if I seem like an ass, but to be honest I think your characterization is wrong. You and RB agree on one point - the actual calculation of VAT at a point of sale is fairly straightforward. While I have expressed skepticism that your particular cases apply in general, my argument is not with that specifically, but with the snarl of frequently changing exemptions that create an administrative overhead somewhere along the line, whether it's higher up in the supply chain or at the end of government regulation and enforcement.

I don't want to put words in RB's mouth, but it seems that he acknowledges this set of exemptions can be complex in his very first post here:

Combined these come to sometimes some odd situations.

Go to Subway and order a ham sub with salad to take away and it'll be VAT-free (despite being prepared, its cold and taken away. Get it toasted or eat it in and VAT is chargeable. Go to Starbucks and buy a muffin and it'll have two prices on it, one for eating in and another for take away. When I was little I used to think shops were charging for the priviledge of eating in and found that rather mean. Go to Domino's and order a pizza and it will always be charged VAT as it was cooked, but a dessert may be VAT-free.

The rules are more complex than just that though as to which items are luxuries or essentials, leading to debates as to eg is a Kit-Kat a biscuit or chocolate? One has VAT the other doesn't.

And again, you seem to be unable to grasp that in reality the 'refunding' of VAT happens with little to no money actually changing in or out of the coffers of the tax-office. The 'refunding' in reality consists of account that tells the tax-office 'this money I collected in VAT is mine and thus I will keep it'.

Dude, it doesn't matter. Do you know how much money GE actually paid in US corporate income tax last year? Zero. Do you know how many pages are in the tax returns they filed? Twenty-four thousand. Not to mention the 250-some other jurisdictions they had to file in. That's a lot of administrative overhead - computer systems and record-keeping at GE, accountants to collate the data and write up the returns, government employees to scrutinize and audit the returns, etc. Actual payment of taxes is irrelevant to the amount of work it takes to deal with the system.

[agamemnus]

Okay so basically the gumming doesn't want some people to eat out? Or is this just a case of them taking what they know they can take because people will still eat out, tax or no tax?

More the case that, regardless of any economic rationale, there is a political calculus. (calculus is "hard"!) Politicians got these laws passed essentially worldwide by demonizing
"rich" people who eat at restaurants.. passing the law gave them something to brag about come next election.

The rules are more complex than just that though as to which items are luxuries or essentials, leading to debates as to eg is a Kit-Kat a biscuit or chocolate? One has VAT the other doesn't.

A biscuit is a piece of soft raised bread with a crust on the outside and a hole in it. Does Kit-Kat have a hole? I think we can safely say "no"!

[Hazir]

Uh, VAT isn't overly complicated? Right, so the groups in Germany who aim at a overhaul of the German system are merely an illusion, then. One of those groups is the Federal Court of Audit, by the way.

Wonderful contribution if you don't tell what they want to change.

Oh cool, what I see is a comment on politicians raising 2.4bn less than they could have because they place goods/services in the lower bracket. Now, that's going to rock the entire system

[Flixy]

Dude, it doesn't matter. Do you know how much money GE actually paid in US corporate income tax last year? Zero. Do you know how many pages are in the tax returns they filed? Twenty-four thousand. Not to mention the 250-some other jurisdictions they had to file in. That's a lot of administrative overhead - computer systems and record-keeping at GE, accountants to collate the data and write up the returns, government employees to scrutinize and audit the returns, etc. Actual payment of taxes is irrelevant to the amount of work it takes to deal with the system.

And like I said, for any small business (not sure how it works for big companies), the tax return is one page. Of course you do need to keep your receipts, and in bigger companies you'd presumably have your bookkeeping checked by an accountant - but you have to that already anyway.

[RandBlade]

wiggin, I agree that changing a system frequently is bureaucratic - the same as any tax. No reason that needs to be done.

More the case that, regardless of any economic rationale, there is a political calculus. (calculus is "hard"!) Politicians got these laws passed essentially worldwide by demonizing
"rich" people who eat at restaurants.. passing the law gave them something to brag about come next election.

No ag, you misunderstand the situation. The reality is the opposite, VAT is a flat charge on all Goods and Services. The zero-rated items are the exceptions not the rule.

There is nothing special about restaurants that attracts VAT to them, VAT is on everything in general. The exception is that fresh food taken home does not attract VAT - that is the exception not the rule. There is nothing special about restaurants, they're just not given the exception. Similarly (and strangely) clothing: Children's clothes are VAT-exempt but adults clothes are not. I suppose though that's because of a real difference between children and adults, children outgrow clothes quickly and regularly need new ones, for adults its a choice. I'm wearing today a t-shirt I got in Australia in the 90's, its lasted over a decade: Not got much left that old now, but most of my clothes are at least a year old and I rarely go shopping for more. Amanda goes shopping for new clothes every pay week it seems! And frequently complains about having "nothing to wear" because she's worn that top twice already. Women! That's a choice unlike children I suppose.

[Khendraja'aro]

Wonderful contribution if you don't tell what they want to change.

Oh cool, what I see is a comment on politicians raising 2.4bn less than they could have because they place goods/services in the lower bracket. Now, that's going to rock the entire system

Actually, they're quite specific on what they want to change. But congratulations to not being able to look further than the point of your nose.

[Flixy]

Well, could you then enlighten us what they want to change?