I am in Zimbabwe and have dealt with VAT without understanding for 5 years (so I used the patterns I saw and it has worked until I started to conflict with the reporting manager). I hesitated researching as I often doubted my capabilities but this video got me to understand the first part of our VAT, the impact and also the correct terminology. I am impressed and pleased that it was simple to understand and not an overwhelming amount to review. Thank you! Following and going through more videos to learn!
Since us Americans have no clue what a value added tax is (like me), this video, along with a couple of others will be getting a lot more attention in the next year or two. With Andrew Yang proposing we use introduce a VAT to help fund UBI, many Americans will be researching videos on VAT and UBI. This is the future. Yang Gang 2020!!
Thanks for your insights, and thank you for watching! I have been getting some traffic as well on my video discussing Marginal Tax Rate: th-cam.com/video/bHGKwQGYlEY/w-d-xo.html
@SUM1DOIDE † Tips aren't a covering for VAT (which isn't present in the USA as of right now), they are a covering for the salary of the personal that served you
@@w_6880 Not really. VAT mostly means that alot of companies can't do dirty tax evasion tricks anymore. Therefore, companies who pay their taxes fairly will benefit from this. This means the company who doesn't pay tax, does not have the advantage over other companies by avoiding tax.
@@w_6880 That's simply not true. Many servers won't claim cash tips to avoid paying taxes on them, but rarely, if ever, do cc tips not add up to minimum wage over the course of a paycheck. Even if they wanted to, most servers couldn't abuse this to get "reimbursed." Source: 15 years in the service industry. You have no clue what you're talking about.
@@ХейХей-ю3ф But the Sales Tax only applies on the consumers. It is the only reason why corporations and factories pay almost 0 or no tax at all, hence why Amazon paid 0 in taxes last year. Edit: I myself am a Right Libertarian (even conservative on some topics) and find that, the sales tax harms the consumers more than VAT.
@@mongtkb depends what's reduced rate, 0%, and exempt, right? Plus, in Yang's plan, that tax hike is offset by a huge stimulus directly to people. For anyone not at the top of the chain already, it will end up being a net positive.
Should every country have Value Added Tax (VAT)? If so, what should governments spend this tax revenue on? Should VAT "replace" other forms of taxation? Let me know by commenting below!
In the USA, Andrew Yang is a democratic candidate for the Presidency. He proposes a Universal Basic Income (Also known as the Freedom Dividend) which will give every adult from age 18 until death $1000 USD/month. This is designed to be a financial foundation upon which people can build their personal finances. It would help resolve the homelessness crisis, allow the elderly to retire with dignity, provide financial freedom to those with financial burden or limited opportunities, and most importantly offer a solution for the inevitable surge of job loss due to automation and technology. This Freedom Dividend would be funded, in part, by a Value Added Tax. Additional funding would come from the reduction in need for social services such as welfare.
Blazing Tiger Yeah it’s not good. Puts more burden on the poor and doesn’t fix the problem of money hoarding that the rich have been doing. This won’t fix the wealth inequality issue.
@@sanmigueltv It will. Since there is a reduced rate/exempt items on things that families NEED such as clothing, food and school supplies, they can avoid the tax and supply what's actually needed and little to no luxuries. Living by their means. It won't totally fix wealth inequality, but it creates a way for families to start thriving instead of focusing on surviving.
@@johnnewsham10 This is honestly huge. I agree with others, that it doesn't fix everything... but when you allow a population the breathing room to direct their attention beyond survival towards education, passions, and health then vast strides can be made in other areas as well.
Basically sales tax only tax the seller, Vat tax everyone in the production and supply chain. Also can't tax dodge. Also Vat is flexible that luxury items like sports car can be taxed at much higher % than groceries.
issue is your taxing the poor people your trying to help rendering your aid useless. High value items can be bought out of the country so you only pay vat on the shipping of the item, rich people can also leave to a place without that still and avoid the tax.
"Basically sales tax only tax the seller" And the burden falls on the purchaser. They put the tax in the price they charge, so effectively it's the purchaser being taxed. Purchasers in the supply chain have the luxury of receiving returns on the taxes. The end customer doesn't, and thus gets the full burden of paying the accrued VAT tax.
Nice video thank, I have a question if you are an intermedia in UK , company that Buy services from other companies to use in Uk and EU the company need to charge VAT to the consumers?
Yes. You need to charge VAT to consumers (output VAT), and you can reclaim the VAT that was on the invoices from your suppliers (input VAT). If you provide services to various countries, the "place of supply" is important to determine. The UK government VAT website can help you on that.
The video says VAT is ultimately a cost to the end consumer, not the businesses. If so, why would Andrew Yang say VAT is the way to get the tech companies to pay for his freedom dividend?
Thank you for watching the video! My description of how VAT works is based on the actual functioning of the VAT system in countries in Europe, where it has been in place for several decades and is working fine. I cannot comment on Andrew Yang's statements, as I have not heard/read any of his speeches. Maybe this is something you can check with his campaign office.
@Caleb Burton Ok, but that means the funds for UBI would be coming from individuals, essentially paying an increased sales tax, rather than directly coming from the companies who are getting rich by automating jobs away... which is what I thought Yang was addressing.
Susan Huang basically the way I understand it is food, utilities, rent, ect. That you need to live a modern life will not have a VAT or it will be low. When you start buying things like cars, phones, games, tobacco products, ect. Things that can be considered luxury items, the VAT will apply. People in low income families will not be buying the “luxury” items so they will not be affected as much by the VAT.
@@shuang10 individuals and end of the supply chain business owners(Amazon and Netflix and all the other tech companies fall under that category) will be paying the biggest amount of value added tax. Some essentials will be exempt, but yes, it ends at the consumer. But it's at 10% half the European level. It is also up to you to pay for these goods and services, ie, some products will be exempt or reduced. it's always a net gain unless you're filthy rich and spend over 10grand a month. The point remains that it would tax amazon. Proposing a tax reform will make more loopholes to be frank, they pay hundreds of thousands for lawyers to figure that shit out, way more than whatever the president will have the official be paid for working on a no hole tax reform. Everyone is genuinely better off with a VAT as rent is not accounted under a VAT which makes the bulk of where most salaries go.
Hi, I have come across a new animal called "import VAT" by which I, a consumer, buy a final product abroad, and am charged an "import VAT" at the border (on top of my customs duties). Isn't that a misnomer? What exactly is the value added that gets taxed? ..the whole product was produced and sold/bought abroad!
Hi Sigmund! From your name, I assume you are residing in Germany or Scandinavia (either way: a consumer residing in the EU), and from you question I assume you have purchased goods from outside the EU. In that case, most but not all of the time, VAT gets added by the customs authorities in the country of destination of the goods or services, if the value of the purchase exceeds a certain threshold amount. Probably best to call the customs office in your country to ask what the specific rules are they apply, and which law enables them to charge this.
Yes me too!! They dropped the €21 threshold as well!! Without warning, now everything I buy from outside the EU gets charged 21% of the items value + customs fees + a fine for not pre-organizing your VAT clearance and fees + delaying your package by weeks. It's now pointless buying anything outside the EU, except markets like AliExpress are now being fully compliant with VAT import fees and documentation etc, probably a lot of packages were returned or whatever and the buyers got a refund (3 months later).
Hello! Thank you for the good explanation, but I still don't understand. In the end, the government collected 80 euros VAT throughout the transaction. The 80 euros is paid by the four businesses, each paid 20 euros. why say businesses don't pay VAT?
Hello Jade! You need to "zoom out" to see the full picture. The consumers at the end of the picture pay Goods €400 VAT €80 Total €480. That is the €80 VAT that I am talking about. Each of the businesses charges output VAT on their invoices, and deducts the input VAT that they were invoiced. The producer (company 1) charges €20 output VAT, while the manufacturer (company 2) deducts the €20 as input VAT, net amount paid to government as a result of this transaction is zero. Then the manufacturer (company 2) charges €40 output VAT, which the distributor (company 3) deducts as input VAT, net amount zero. Etcetera, until you get to the consumer at the end of the supply chain who pays €80 VAT, but has no opportunity to deduct it.
Hello Omar! Interesting suggestion, but I do believe that collecting VAT throughout the chain of supply is easier for companies (simplicity of not requiring a set of rules to determine who is and is not considered an end user) and minimizes the collection risk for the government (collect small increments from each company in the chain of supply rather than one big amount at the point of sale).
Yes, I would think so. You are supplying services to consumers in a country where VAT is in place. The experts on this kind of questions are my friends at SimplyVAT: th-cam.com/channels/BEgv8-65VR284xIjf4GO1A.html
If as a retailer if I purchase goods from an xyz distributor, What happens if the xyz distributor is a non-filer of VAT returns. As a retailer would I still get input tax credit?
Somehow you are going to pay taxes anyway.... either the government takes it from your salary (direct taxes) or when spending your money (indirect taxes). Some countries are higher on direct taxes, others on indirect taxes. Many countries run a big budget deficit by spending more than they collect, and will someday "blow up" financially.
Nah if you're spending less than $10,000/mo you're going to be a net recipient since Yang is sending each and every American Citizen $1,000/mo :D If you're here illegally that's another case... good luck dealing with the VAT if you're an illegal immigrant who isn't receiving the UBI.
The important thing to note in the example is that the government collects $80 and the consumer pays $80. It's like a sales tax only with extra steps and more flexibility. No thanks.
Hi Steele! Let me correct you on the math. In the example, the consumer pays €480, of which €400 goes to the various companies in the chain of supply (producer, manufacturer, distributor, retailer), and €80 goes to the government in VAT (indirect tax revenue). To keep the example simple, each of the four companies in the chain of supply makes €100, and 4x €100 = €400. Whether you "like" the VAT system or not, and would or would not want this implemented in the US, is not in the scope of the video, and none of my business as I am not a US citizen. The only viewpoint I can contribute is that the VAT system works well in the countries of the European Union.
@@TheFinanceStoryteller I don't think we are in disagreement about the math. I was talking only about the tax (excluding the cost of goods). I think a lot of people get confused by the cash flows and don't realize that it's the consumer (us) bearing the burden of yet another tax.
Yep, I agree with you on that. It's the consumer who pays VAT. Although someone left a comment to this video with a link to some research that suggests that in some cases companies take a bit of a margin hit "voluntarily" when VAT is implemented (or when VAT rates in a country get increased). An example of that would be a product that is currently selling for $100 in a system with no VAT, would be expected to sell at $120 if a 20% VAT is implemented, but the company selling the product deciding to raise the price only to $115 including VAT and $95 excluding VAT, thereby having the company taking a net $5 hit and the consumer a net $15 hit versus the old situation. Unless the VAT revenue is subsequently used by the government to lower personal income taxes for individuals or to lower corporate income taxes, but that gets awfully complicated to simulate.
@@TheFinanceStoryteller Thanks for the replies -- I just subscribed. The margin adjustment theory is interesting and definitely possible. I guess I would be open to implementing a VAT if it included other adjustments to the current tax system, such as lowering personal income taxes.
@@ХейХей-ю3ф Wrong. The good can change hands an infinite number of times or 3 times but if the value added is $400 with a VAT tax of 20%, the VAT tax collected will always be $80.
Sales tax is levied on the sale of a good or service to its final end user. Tax jurisdictions do not receive the tax revenue until the sale is made to the final consumer. VAT (Value-Added Tax) is collected by all sellers in each stage of the supply chain.
@@mongtkb wouldn't the price just be "honest" now. Maybe this is why european countries are known to have the sales tax already in it. Turns out it might be the VAT. But I don't know if one system is better than the other.
@perfect stranger That is a very good question, actually! As the term VAT suggests, it is a taxation on the value added. Using the supply chain example in the video: in case the retailer slashes the sales price, and ends up selling the product for just €200 ex VAT, then the VAT charged to the consumer on that will be €40, while the retailer can reclaim €60 of input VAT charged to him by the distributor, i.e. the retailer files a net reclaim with the government of €20. Obviously, selling products at a loss is not a sustainable business model, so this should be an exception. Over the full chain of supply, the VAT is still correctly charged.
@perfect stranger Correct, it is better for the government to get increments of VAT along the chain of supply. Let's assume the sale of products has occurred along the chain of supply in the four steps of the example in the video. The retailer leaves the country without a trace, is never heard of again, and does not file his VAT declaration or pays it. The lost tax revenue on the side of the government is €20 (the last step in the chain), while €60 has already been collected by the government in the first three steps. Painful, but at least the majority of the VAT has been collected.
Thanks for the information! Does the Philippines have one rate only for every type of goods and services? Or is there a "high rate"(for example for luxury goods) and a "low rate" (for example for food)?
@@TheFinanceStoryteller we have 3 rates: 12%, zero rated, and exempt. The 12% pretty much covers all types of goods and services. We even have VAT on use/lease of land which accdg to a lecturer is peculiar to Philippine VAT.
D ko maintindihan english kse.cnu ba mkikinabang sa evat na yan,mga senador ba at ibng corrupt na politiko?kayhirap na nga ng buhay may vat na meron png evat. apektado jan mga mhihirap.
IVA.. America Is a value added sales charge that used in America continent. In Duty Free shop and other stores in America.. VAT.. Europea Is a value added sales charge that used in Europea continent.. in Duty Free shop and other stores in Europea..
Unless you plan on using VAT income to fund UBI. Since wealthy people would spend more money than middle class people, they would be way more effected by VAT. While middle class people that spent extra money because of VAT, will get their money back through UBI.
@@ХейХей-ю3ф I haven't double checked your calculations, but your initial claim is not true. Companies spend and invest money to make money, Google didn't become a huge company by saving.
@@ХейХей-ю3ф Yes and they spend that money afterwards, which is taxable by vat. Google doesn't sell people's data, but uses people's data to show ads. They keep it to themselves. Andrew Yang also proposes that every individual should be compensated for their data when it's being used. Implementing UBI and ownership of data would fix these issues.
What you're describing is a gross receipts tax not a value-added tax. In a value-added tax only the value added in each stage of production is getting taxed so the same value doesn't get taxed multiple times throughout the production process.
I am describing the VAT system as it is in place in Europe. If you would watch the video carefully, you would see that each company in the chain of supply charges VAT on its output, and reclaims the VAT that it has paid on its input. As a result of that, the net amount taxed in each stage of production is the value added in that stage.
Thank you very much for this course sir. I recently joined a company as an accountant in the Netherlands. the company have an intercompany with baby company in Singapore. so singapore makes a sales to a customer in australia>> NL sends the goods to the client in Australia ( and later invoice singapore intercompany) My question is the courier DHL or Schenker sends NL a tax invoice but when in Australia the courier charges the customer another kind of invoice. the customer now send us this kind of invoice which is only like tax invoice. now in Netherland, I do not know how to book this kind of invoice or how to classify this type of invoice under the tax rules.? Can my company book this type of VAT to claim it from the belastingdienst? and under which tax code is applicable? Thank you for your reaction?
Hello Heartwell! Welcome to the Netherlands. :-) Did you recognize my accent? ;-) You are describing a very complex international logistics/VAT example. I have no expertise on these situations that involve goods and services transactions outside the EU, but I do know that the Dutch Belastingdienst is usually very helpful and responsive on questions. Probably best to contact them directly. I assume Australian VAT or sales tax would not be deductible in the Netherlands.
The Finance Storyteller Thank you sir for the info. I just love your teaching . Yes I did recognized your accent since am part of the dutch committee now :). Hartelijke dank.
I agree with the other comment, the example shows the consumer is the one who ends up paying all 80 Euros while the businesses in the supply chain get all their VAT payments back. How is this "getting the sliver of Amazon sales" according to Andrew Yang? Amazon is part of the supply chain and so will end up paying no VAT! I understand the VAT can be zero or exempted for foods and other necessities, but it's still a tax on the consumers on most goods and services.
Since wealthy people would spend more money than middle class people, they would be way more effected by VAT. While middle class people that spent extra money because of VAT, will get their money back through UBI.
Because you are getting $1000 per month in the form of the UBI. How much $$$ are you expected to spend on goods to offset the extra $1k? Per Yang, the VAT can be adjusted to exclude certain essential items
Can someone clarify: What is the actual purpose of the VAT? Does it distribute tax burden throughout supply chain, instead of the end consumer? Is it a replacement or substitute for higher corporate rates then?
It is a tax on consumption of goods and services, and part of the overall tax regime in a country which often also includes taxes on labor, taxes on wealth, inheritance taxes, etc.
It's to hide yet another tax behind a convoluted system. If you stop to realize just how much we are being taxed when you add up all the little or hidden taxes its really quite staggering.
Hello Andrew! I am a bit confused by your question. Why would the retailer charge 0 VAT? Is he not selling anything, so the calculation would be 0 revenue * 21% VAT (or whatever rate is applicable) = 0 VAT. Or is he selling goods or services that fall in a 0% VAT category, so the calculation would be (for example) $1000 revenue * 0% VAT = $0 VAT. Or is he selling goods or services that are exempt from VAT (in which case he cannot claim back input VAT either).
seems like it would cause businesses to be engaged in all parts of production and hurt specialization. That way they add value internally instead of adding it on at every step
VAT alone is regressive, you are correct. However, when combined with a flat $1000 / month it is no longer regressive. If someone were getting $1k a month, they would have to spend over $120,000 a year (and pay $12000 in taxes) to lose money.
@@w_6880 Well you have to remember that the US bailed out banks for $4T during the recession. Not only is $1000/mo cheaper than the wall street bailout, it's also less expensive than you think. A lot of the money comes back in the form of taxes since it is being spent in the economy. This website gives a pretty good analysis of the idea: freedom-dividend.com. I disagree with some of their numbers, particularly some of their economic growth numbers. But with a properly tailored VAT, it is absolutely possible.
@@w_6880 Because it's paid by every step from professional company to another. It's linked like a train. This is very hard to do Tax Evasion. While the single tax paid at the end is hard to track and easy to evade tax. VAT = better.
Not really. VAT is not a cost to businesses themselves, they collect and pay it “on behalf of the government”, over the various stages of the chain of supply. Each business charges output VAT and claims back the input VAT. The consumer pays 80 Euro VAT on a product of 400 Euro, making the price including VAT 480 Euro.
@@TheFinanceStoryteller OK, got it. However, it is a coat the business pays because it is opportunity cost that the consumer could otherwise spend, and as well it artificially limits the.price the manufacturer of seller can change, this reducing their profits. Is that your understanding as well? I have yet to see the value derived from paying even 1% VAT. Do you have any examples?
VAT is a form of indirect taxation, you pay the tax when you spend money on consumption, which increases the total price you pay. Income taxes are a form of direct taxation, the tax is deducted from your gross salary and you only get paid the net salary. The sum of direct taxation and indirect taxation for individuals, corporate income taxes, and whatever other taxes might be in place in a country form a country's tax revenue. From that tax revenue, roads are paved and maintained, police, fire departments, judges and teachers are paid. In my opinion, a sensible government (representing the inhabitants of a country) balances the government's income with the government's spending.
@@themaverickblackbelt8054 Yes, been running my own training and consulting company for 15 years now, which is subject to VAT administration and reporting.
No, I don't think so. The obligation to charge VAT to the "next one in the chain" and the right for companies to reclaim input VAT is indifferent to whether it is a related or unrelated party. So in the context of the video, one manufacturer can supply to various distributors, and one distributor might be buying from various manufacturers.
VAT is registered by legal entity. Distributor and manufacturer could be the "same company" for corporate income tax purposes, or for reporting to the stock market (consolidated financial statements in US GAAP or IFRS), but VAT taxation and administration is done at the legal entity level. Check the part of the video again where the "supply chain" is discussed. Ultimately, the consumer is charged with the VAT. Anything that happens before that in the supply chain is one company charging and the other one reclaiming, i.e. a "zero sum" game for companies that are VAT registered. So, to finally answer your question, they "pay twice" and "reclaim twice", net VAT charge to company is zero.
Well, it's a choice that a country needs to make... does a government raise its tax income by direct taxation (taking it out from people's wages through an income tax) or indirect taxation (VAT or sales tax on goods and services). Once VAT is in place (and it has been in place in many countries for decades), only an increase of the VAT rate would cause inflation (with inflation defined as increase in price levels). In my country of The Netherlands, we have had an increase in VAT rates in recent years in return for lowering income tax levels. So I am basically paying the same amount of total taxes this year as I did a few years back, but at a different point in time, as it is shifting from when I "make money" to when I "spend money".
In monetary economics, the equation of exchange (algebraic formulation comes from Irving Fisher, 1911) is the relation: M ⋅ V = P ⋅ Q (M times V equals P times Q) where, for a given period, M is the total nominal amount of money supply in circulation on average in an economy. V is the velocity of money, that is the average frequency with which a unit of money is spent. P is the price level. Q is an index of real expenditures (on newly produced goods and services). So if you increase the amount of money (“print money”) while the velocity stays the same and the amount of goods and services stay the same, then indeed you increase the price levels.
As long as Andrew Yang taxes only the conglomerate tech companies, then I will vote for Yang. He better not be VAT-ing small businesses. Holy cow, can you imagine all the administrative work involved??
I cannot comment on the US situation, but being the owner of a VAT- registered company in The Netherlands, I can tell you that in my case it involves minimal work. It all depends on IT system setup.
@@ХейХей-ю3ф What you not understanding is the input VAT is refunded to the merchant along the chain, only the output VAT is what government collects, Its a tax on the value added along the chain. In the example video because 100 in value is added every time, Government collect 20 and refunds the rest !
@@ХейХей-ю3ф It does not cost 480 with VAT, VAT is just a more efficient way of collection, the input VAT% is always subtracted and refunded to the merchant !
Want to learn more about how to calculate VAT? Watch my video on VAT exclusive and VAT inclusive: th-cam.com/video/d3j9OdOQqmU/w-d-xo.html
You, Sir, have strung me through my entire college experience. I'm graduating this year!!!! God bless!
Congratulations!!!! Well done. Very good to search for additional information/explanations on TH-cam, to enhance what you learned in college.
I am in Zimbabwe and have dealt with VAT without understanding for 5 years (so I used the patterns I saw and it has worked until I started to conflict with the reporting manager). I hesitated researching as I often doubted my capabilities but this video got me to understand the first part of our VAT, the impact and also the correct terminology. I am impressed and pleased that it was simple to understand and not an overwhelming amount to review. Thank you! Following and going through more videos to learn!
Thank you for the kind words, and happy to help!
Since us Americans have no clue what a value added tax is (like me), this video, along with a couple of others will be getting a lot more attention in the next year or two. With Andrew Yang proposing we use introduce a VAT to help fund UBI, many Americans will be researching videos on VAT and UBI. This is the future.
Yang Gang 2020!!
Thanks for your insights, and thank you for watching! I have been getting some traffic as well on my video discussing Marginal Tax Rate: th-cam.com/video/bHGKwQGYlEY/w-d-xo.html
@SUM1DOIDE † Tips aren't a covering for VAT (which isn't present in the USA as of right now), they are a covering for the salary of the personal that served you
@@w_6880 Not really. VAT mostly means that alot of companies can't do dirty tax evasion tricks anymore. Therefore, companies who pay their taxes fairly will benefit from this. This means the company who doesn't pay tax, does not have the advantage over other companies by avoiding tax.
@@w_6880 That's simply not true. Many servers won't claim cash tips to avoid paying taxes on them, but rarely, if ever, do cc tips not add up to minimum wage over the course of a paycheck. Even if they wanted to, most servers couldn't abuse this to get "reimbursed." Source: 15 years in the service industry. You have no clue what you're talking about.
@@ХейХей-ю3ф But the Sales Tax only applies on the consumers. It is the only reason why corporations and factories pay almost 0 or no tax at all, hence why Amazon paid 0 in taxes last year.
Edit: I myself am a Right Libertarian (even conservative on some topics) and find that, the sales tax harms the consumers more than VAT.
Andrew Yang Brought me here.
Great to hear the "word of mouth" recommendations are working! Please pay it forward and tell your friends as well.
🤣🤣🤣 me too!!!
Generalissimo Reply it’s a tax on consumers, poor or not.
Generalissimo Reply I might also say that the more money someone has the more they’d spend on consumer goods.
@@mongtkb depends what's reduced rate, 0%, and exempt, right? Plus, in Yang's plan, that tax hike is offset by a huge stimulus directly to people. For anyone not at the top of the chain already, it will end up being a net positive.
Should every country have Value Added Tax (VAT)? If so, what should governments spend this tax revenue on? Should VAT "replace" other forms of taxation? Let me know by commenting below!
In the USA, Andrew Yang is a democratic candidate for the Presidency. He proposes a Universal Basic Income (Also known as the Freedom Dividend) which will give every adult from age 18 until death $1000 USD/month. This is designed to be a financial foundation upon which people can build their personal finances. It would help resolve the homelessness crisis, allow the elderly to retire with dignity, provide financial freedom to those with financial burden or limited opportunities, and most importantly offer a solution for the inevitable surge of job loss due to automation and technology. This Freedom Dividend would be funded, in part, by a Value Added Tax. Additional funding would come from the reduction in need for social services such as welfare.
Here to learn more about Andrew yangs V.A.T. Plan.
Welcome! :-) I made the video way before I ever heard of Andrew Yang or his VAT plan, I hope it helps to explain how the mechanism works.
Blazing Tiger
Yeah it’s not good. Puts more burden on the poor and doesn’t fix the problem of money hoarding that the rich have been doing. This won’t fix the wealth inequality issue.
@@sanmigueltv It will. Since there is a reduced rate/exempt items on things that families NEED such as clothing, food and school supplies, they can avoid the tax and supply what's actually needed and little to no luxuries. Living by their means. It won't totally fix wealth inequality, but it creates a way for families to start thriving instead of focusing on surviving.
@@johnnewsham10 This is honestly huge. I agree with others, that it doesn't fix everything... but when you allow a population the breathing room to direct their attention beyond survival towards education, passions, and health then vast strides can be made in other areas as well.
@@St0neByte "Fair Tax System" is so much better.
Basically sales tax only tax the seller, Vat tax everyone in the production and supply chain.
Also can't tax dodge.
Also Vat is flexible that luxury items like sports car can be taxed at much higher % than groceries.
issue is your taxing the poor people your trying to help rendering your aid useless. High value items can be bought out of the country so you only pay vat on the shipping of the item, rich people can also leave to a place without that still and avoid the tax.
@@dmcoub78 Doesn't every major 1st world country have a vat tax?
@@dmcoub78 wouldn´t it be more expensive for companies like amazon to operate in a market with a VAT?
"Basically sales tax only tax the seller"
And the burden falls on the purchaser. They put the tax in the price they charge, so effectively it's the purchaser being taxed. Purchasers in the supply chain have the luxury of receiving returns on the taxes. The end customer doesn't, and thus gets the full burden of paying the accrued VAT tax.
@@St0neByte Every 1st world nation having something doesn't alone indicate if that something is good or bad. You still have to evaluate it
Good to learn here. I have no idea of reverse charge but got tangible info on being applicale to cross border transactions.
Glad it was helpful! 😊
Thanks man I understood everything n how taxes work.
Happy to help!
Great! Thanks for the info! 👍
Glad you liked it, Wil! Thank you for watching and commenting.
Thank you 🎉 it's years ago but it is still help ful
Glad to hear that :-)
Thank you for the video!
You're welcome!
Thanks for the info.
You're welcome, Ambuj!
Thanks sir good information
Happy to help!
Thank you very helpful
Nice to hear that! Thank you for watching and commenting.
GoOd
Thanks! Have a look at the sequel on how to calculate VAT as well: th-cam.com/video/d3j9OdOQqmU/w-d-xo.html
Clean and perfect one....
Great to hear that, Bharathy! Thank you very much.
Thank you man may allah bless you
Thank you! Enjoy the videos.
Very helpful
Thank you, Mohammed! Nice to hear that.
Nice video thank, I have a question if you are an intermedia in UK , company that Buy services from other companies to use in Uk and EU the company need to charge VAT to the consumers?
Yes. You need to charge VAT to consumers (output VAT), and you can reclaim the VAT that was on the invoices from your suppliers (input VAT). If you provide services to various countries, the "place of supply" is important to determine. The UK government VAT website can help you on that.
The video says VAT is ultimately a cost to the end consumer, not the businesses. If so, why would Andrew Yang say VAT is the way to get the tech companies to pay for his freedom dividend?
Thank you for watching the video! My description of how VAT works is based on the actual functioning of the VAT system in countries in Europe, where it has been in place for several decades and is working fine. I cannot comment on Andrew Yang's statements, as I have not heard/read any of his speeches. Maybe this is something you can check with his campaign office.
@Caleb Burton Ok, but that means the funds for UBI would be coming from individuals, essentially paying an increased sales tax, rather than directly coming from the companies who are getting rich by automating jobs away... which is what I thought Yang was addressing.
Susan Huang basically the way I understand it is food, utilities, rent, ect. That you need to live a modern life will not have a VAT or it will be low. When you start buying things like cars, phones, games, tobacco products, ect. Things that can be considered luxury items, the VAT will apply. People in low income families will not be buying the “luxury” items so they will not be affected as much by the VAT.
The vat tax would be more for Jeff bezos when he buys a 10mil yacht he uses once a year. Not for everyday stuff.
@@shuang10 individuals and end of the supply chain business owners(Amazon and Netflix and all the other tech companies fall under that category) will be paying the biggest amount of value added tax. Some essentials will be exempt, but yes, it ends at the consumer. But it's at 10% half the European level. It is also up to you to pay for these goods and services, ie, some products will be exempt or reduced. it's always a net gain unless you're filthy rich and spend over 10grand a month. The point remains that it would tax amazon. Proposing a tax reform will make more loopholes to be frank, they pay hundreds of thousands for lawyers to figure that shit out, way more than whatever the president will have the official be paid for working on a no hole tax reform.
Everyone is genuinely better off with a VAT as rent is not accounted under a VAT which makes the bulk of where most salaries go.
Thank you
You're welcome!
Hi, I have come across a new animal called "import VAT" by which I, a consumer, buy a final product abroad, and am charged an "import VAT" at the border (on top of my customs duties).
Isn't that a misnomer?
What exactly is the value added that gets taxed?
..the whole product was produced and sold/bought abroad!
Hi Sigmund! From your name, I assume you are residing in Germany or Scandinavia (either way: a consumer residing in the EU), and from you question I assume you have purchased goods from outside the EU. In that case, most but not all of the time, VAT gets added by the customs authorities in the country of destination of the goods or services, if the value of the purchase exceeds a certain threshold amount. Probably best to call the customs office in your country to ask what the specific rules are they apply, and which law enables them to charge this.
Yes me too!! They dropped the €21 threshold as well!! Without warning, now everything I buy from outside the EU gets charged 21% of the items value + customs fees + a fine for not pre-organizing your VAT clearance and fees + delaying your package by weeks. It's now pointless buying anything outside the EU, except markets like AliExpress are now being fully compliant with VAT import fees and documentation etc, probably a lot of packages were returned or whatever and the buyers got a refund (3 months later).
1:00 VAT is not a cost to businesses themselves, they collect and pay it on behalf of the government***
YES! That's the quote that made me stop and comment!! As if paying it to the govt makes it free.
Hello! Thank you for the good explanation, but I still don't understand.
In the end, the government collected 80 euros VAT throughout the transaction. The 80 euros is paid by the four businesses, each paid 20 euros. why say businesses don't pay VAT?
Hello Jade! You need to "zoom out" to see the full picture. The consumers at the end of the picture pay Goods €400 VAT €80 Total €480. That is the €80 VAT that I am talking about. Each of the businesses charges output VAT on their invoices, and deducts the input VAT that they were invoiced. The producer (company 1) charges €20 output VAT, while the manufacturer (company 2) deducts the €20 as input VAT, net amount paid to government as a result of this transaction is zero. Then the manufacturer (company 2) charges €40 output VAT, which the distributor (company 3) deducts as input VAT, net amount zero. Etcetera, until you get to the consumer at the end of the supply chain who pays €80 VAT, but has no opportunity to deduct it.
@@TheFinanceStoryteller Thank you so much!! I see it now 🙈 😄😄
thank u
You're welcome!
So why not just charge the 20% tax at the point of sale? Wouldn't that make this much simpler or am I missing something?
Hello Omar! Interesting suggestion, but I do believe that collecting VAT throughout the chain of supply is easier for companies (simplicity of not requiring a set of rules to determine who is and is not considered an end user) and minimizes the collection risk for the government (collect small increments from each company in the chain of supply rather than one big amount at the point of sale).
How I understand it is the government gets more revenue through VAT than just a flat sales tax slapped on items.
Do you pay VAT to govt. if you sell digital goods like online courses and affiliate marketing products?
Yes, I would think so. You are supplying services to consumers in a country where VAT is in place. The experts on this kind of questions are my friends at SimplyVAT: th-cam.com/channels/BEgv8-65VR284xIjf4GO1A.html
If as a retailer if I purchase goods from an xyz distributor, What happens if the xyz distributor is a non-filer of VAT returns. As a retailer would I still get input tax credit?
You can only reclaim VAT if you can provide valid invoices from your suppliers that show that they have charged you VAT.
Wow. And we, the final consumers, are actually the ones who pay it. What a fucking scam.
Somehow you are going to pay taxes anyway.... either the government takes it from your salary (direct taxes) or when spending your money (indirect taxes). Some countries are higher on direct taxes, others on indirect taxes. Many countries run a big budget deficit by spending more than they collect, and will someday "blow up" financially.
Some states in the USA will impose an out of state VAT method of taxation for on line purchases in the near future.
So this VAT + Sales tax = no money left for me
Nah if you're spending less than $10,000/mo you're going to be a net recipient since Yang is sending each and every American Citizen $1,000/mo :D If you're here illegally that's another case... good luck dealing with the VAT if you're an illegal immigrant who isn't receiving the UBI.
The important thing to note in the example is that the government collects $80 and the consumer pays $80. It's like a sales tax only with extra steps and more flexibility. No thanks.
Hi Steele! Let me correct you on the math. In the example, the consumer pays €480, of which €400 goes to the various companies in the chain of supply (producer, manufacturer, distributor, retailer), and €80 goes to the government in VAT (indirect tax revenue). To keep the example simple, each of the four companies in the chain of supply makes €100, and 4x €100 = €400.
Whether you "like" the VAT system or not, and would or would not want this implemented in the US, is not in the scope of the video, and none of my business as I am not a US citizen. The only viewpoint I can contribute is that the VAT system works well in the countries of the European Union.
@@TheFinanceStoryteller I don't think we are in disagreement about the math. I was talking only about the tax (excluding the cost of goods). I think a lot of people get confused by the cash flows and don't realize that it's the consumer (us) bearing the burden of yet another tax.
Yep, I agree with you on that. It's the consumer who pays VAT. Although someone left a comment to this video with a link to some research that suggests that in some cases companies take a bit of a margin hit "voluntarily" when VAT is implemented (or when VAT rates in a country get increased). An example of that would be a product that is currently selling for $100 in a system with no VAT, would be expected to sell at $120 if a 20% VAT is implemented, but the company selling the product deciding to raise the price only to $115 including VAT and $95 excluding VAT, thereby having the company taking a net $5 hit and the consumer a net $15 hit versus the old situation. Unless the VAT revenue is subsequently used by the government to lower personal income taxes for individuals or to lower corporate income taxes, but that gets awfully complicated to simulate.
@@TheFinanceStoryteller Thanks for the replies -- I just subscribed. The margin adjustment theory is interesting and definitely possible. I guess I would be open to implementing a VAT if it included other adjustments to the current tax system, such as lowering personal income taxes.
@@ХейХей-ю3ф Wrong. The good can change hands an infinite number of times or 3 times but if the value added is $400 with a VAT tax of 20%, the VAT tax collected will always be $80.
So how is this different from the sales tax system used in America?
Sales tax is levied on the sale of a good or service to its final end user. Tax jurisdictions do not receive the tax revenue until the sale is made to the final consumer. VAT (Value-Added Tax) is collected by all sellers in each stage of the supply chain.
@@mongtkb wouldn't the price just be "honest" now. Maybe this is why european countries are known to have the sales tax already in it. Turns out it might be the VAT.
But I don't know if one system is better than the other.
@perfect stranger That is a very good question, actually! As the term VAT suggests, it is a taxation on the value added. Using the supply chain example in the video: in case the retailer slashes the sales price, and ends up selling the product for just €200 ex VAT, then the VAT charged to the consumer on that will be €40, while the retailer can reclaim €60 of input VAT charged to him by the distributor, i.e. the retailer files a net reclaim with the government of €20. Obviously, selling products at a loss is not a sustainable business model, so this should be an exception. Over the full chain of supply, the VAT is still correctly charged.
@perfect stranger Correct, it is better for the government to get increments of VAT along the chain of supply. Let's assume the sale of products has occurred along the chain of supply in the four steps of the example in the video. The retailer leaves the country without a trace, is never heard of again, and does not file his VAT declaration or pays it. The lost tax revenue on the side of the government is €20 (the last step in the chain), while €60 has already been collected by the government in the first three steps. Painful, but at least the majority of the VAT has been collected.
In the Philippines, its 12% :)
yeah, philippine peso; 1 euro is roughly around 60 pesos; 1 pound around 67 pesos
Thanks for the information! Does the Philippines have one rate only for every type of goods and services? Or is there a "high rate"(for example for luxury goods) and a "low rate" (for example for food)?
@@TheFinanceStoryteller we have 3 rates: 12%, zero rated, and exempt. The 12% pretty much covers all types of goods and services. We even have VAT on use/lease of land which accdg to a lecturer is peculiar to Philippine VAT.
D ko maintindihan english kse.cnu ba mkikinabang sa evat na yan,mga senador ba at ibng corrupt na politiko?kayhirap na nga ng buhay may vat na meron png evat. apektado jan mga mhihirap.
IVA.. America
Is a value added sales charge that used in America continent. In Duty Free shop and other stores in America..
VAT.. Europea
Is a value added sales charge that used in Europea continent.. in Duty Free shop and other stores in Europea..
3:22 VAT is a tax that impacts consumers
Unless you plan on using VAT income to fund UBI. Since wealthy people would spend more money than middle class people, they would be way more effected by VAT. While middle class people that spent extra money because of VAT, will get their money back through UBI.
@@ХейХей-ю3ф I haven't double checked your calculations, but your initial claim is not true. Companies spend and invest money to make money, Google didn't become a huge company by saving.
@@ХейХей-ю3ф Google's 70 percent of income comes from advertising, not selling data.
@@ХейХей-ю3ф Yes and they spend that money afterwards, which is taxable by vat.
Google doesn't sell people's data, but uses people's data to show ads. They keep it to themselves. Andrew Yang also proposes that every individual should be compensated for their data when it's being used. Implementing UBI and ownership of data would fix these issues.
Fine like it
Great to hear that, Chinenye!
What you're describing is a gross receipts tax not a value-added tax. In a value-added tax only the value added in each stage of production is getting taxed so the same value doesn't get taxed multiple times throughout the production process.
I am describing the VAT system as it is in place in Europe. If you would watch the video carefully, you would see that each company in the chain of supply charges VAT on its output, and reclaims the VAT that it has paid on its input. As a result of that, the net amount taxed in each stage of production is the value added in that stage.
Thank you very much for this course sir. I recently joined a company as an accountant in the Netherlands. the company have an intercompany with baby company in Singapore. so singapore makes a sales to a customer in australia>> NL sends the goods to the client in Australia ( and later invoice singapore intercompany) My question is the courier DHL or Schenker sends NL a tax invoice but when in Australia the courier charges the customer another kind of invoice. the customer now send us this kind of invoice which is only like tax invoice. now in Netherland, I do not know how to book this kind of invoice or how to classify this type of invoice under the tax rules.? Can my company book this type of VAT to claim it from the belastingdienst? and under which tax code is applicable? Thank you for your reaction?
Hello Heartwell! Welcome to the Netherlands. :-) Did you recognize my accent? ;-) You are describing a very complex international logistics/VAT example. I have no expertise on these situations that involve goods and services transactions outside the EU, but I do know that the Dutch Belastingdienst is usually very helpful and responsive on questions. Probably best to contact them directly. I assume Australian VAT or sales tax would not be deductible in the Netherlands.
The Finance Storyteller Thank you sir for the info. I just love your teaching . Yes I did recognized your accent since am part of the dutch committee now :). Hartelijke dank.
Graag gedaan! :-)
I agree with the other comment, the example shows the consumer is the one who ends up paying all 80 Euros while the businesses in the supply chain get all their VAT payments back. How is this "getting the sliver of Amazon sales" according to Andrew Yang? Amazon is part of the supply chain and so will end up paying no VAT! I understand the VAT can be zero or exempted for foods and other necessities, but it's still a tax on the consumers on most goods and services.
Since wealthy people would spend more money than middle class people, they would be way more effected by VAT. While middle class people that spent extra money because of VAT, will get their money back through UBI.
Because you are getting $1000 per month in the form of the UBI. How much $$$ are you expected to spend on goods to offset the extra $1k?
Per Yang, the VAT can be adjusted to exclude certain essential items
Business owner pay vat tax when they spend at other businesses
@@Xx_Ultimate_Noscoper_xX middle class will pay more tax like upper class & the rich . Vat tax screw everyone in northern Europe
@@coopsnz1 You're replying to a year old comment to showcase how bad you're at math.
Can someone clarify: What is the actual purpose of the VAT? Does it distribute tax burden throughout supply chain, instead of the end consumer? Is it a replacement or substitute for higher corporate rates then?
It is a tax on consumption of goods and services, and part of the overall tax regime in a country which often also includes taxes on labor, taxes on wealth, inheritance taxes, etc.
It's to hide yet another tax behind a convoluted system. If you stop to realize just how much we are being taxed when you add up all the little or hidden taxes its really quite staggering.
In the circumstance that the retailer charges 0 VAT, how much do they have to remit to the government?
Hello Andrew! I am a bit confused by your question. Why would the retailer charge 0 VAT? Is he not selling anything, so the calculation would be 0 revenue * 21% VAT (or whatever rate is applicable) = 0 VAT. Or is he selling goods or services that fall in a 0% VAT category, so the calculation would be (for example) $1000 revenue * 0% VAT = $0 VAT. Or is he selling goods or services that are exempt from VAT (in which case he cannot claim back input VAT either).
seems like it would cause businesses to be engaged in all parts of production and hurt specialization. That way they add value internally instead of adding it on at every step
VAT is a regressive taxation.
VAT alone is regressive, you are correct. However, when combined with a flat $1000 / month it is no longer regressive.
If someone were getting $1k a month, they would have to spend over $120,000 a year (and pay $12000 in taxes) to lose money.
Isn't a sales tax equally regressive.
@@w_6880 Well you have to remember that the US bailed out banks for $4T during the recession.
Not only is $1000/mo cheaper than the wall street bailout, it's also less expensive than you think. A lot of the money comes back in the form of taxes since it is being spent in the economy.
This website gives a pretty good analysis of the idea: freedom-dividend.com.
I disagree with some of their numbers, particularly some of their economic growth numbers. But with a properly tailored VAT, it is absolutely possible.
VAT will avoid alot of Tax evasion. Are you a tax evader ?
@@w_6880 Because it's paid by every step from professional company to another. It's linked like a train. This is very hard to do Tax Evasion. While the single tax paid at the end is hard to track and easy to evade tax. VAT = better.
Can u differentiate VAT from EVAT?
I have no idea what EVAT is, never heard of that before.
@@TheFinanceStoryteller Expanded Value Added Tax
Thank you. Now I know at least what EVAT stands for, but still have no idea how it works. Sorry!
@@TheFinanceStoryteller it's okay hahahaha, thank you very much!!
So each step along the way pays 20% of the previous step's value except the consumer who pays the cumulative net amounts on top?
Not really. VAT is not a cost to businesses themselves, they collect and pay it “on behalf of the government”, over the various stages of the chain of supply. Each business charges output VAT and claims back the input VAT. The consumer pays 80 Euro VAT on a product of 400 Euro, making the price including VAT 480 Euro.
@@TheFinanceStoryteller OK, got it. However, it is a coat the business pays because it is opportunity cost that the consumer could otherwise spend, and as well it artificially limits the.price the manufacturer of seller can change, this reducing their profits. Is that your understanding as well?
I have yet to see the value derived from paying even 1% VAT. Do you have any examples?
VAT is a form of indirect taxation, you pay the tax when you spend money on consumption, which increases the total price you pay. Income taxes are a form of direct taxation, the tax is deducted from your gross salary and you only get paid the net salary. The sum of direct taxation and indirect taxation for individuals, corporate income taxes, and whatever other taxes might be in place in a country form a country's tax revenue. From that tax revenue, roads are paved and maintained, police, fire departments, judges and teachers are paid. In my opinion, a sensible government (representing the inhabitants of a country) balances the government's income with the government's spending.
@@TheFinanceStoryteller
Have ypu ever owned a business?
@@themaverickblackbelt8054 Yes, been running my own training and consulting company for 15 years now, which is subject to VAT administration and reporting.
Doesn't this heavily encourage vertical monopolies?
No, I don't think so. The obligation to charge VAT to the "next one in the chain" and the right for companies to reclaim input VAT is indifferent to whether it is a related or unrelated party. So in the context of the video, one manufacturer can supply to various distributors, and one distributor might be buying from various manufacturers.
@@TheFinanceStoryteller But if the distributor is the same company as the manufacturer do they pay the VAT twice?
VAT is registered by legal entity. Distributor and manufacturer could be the "same company" for corporate income tax purposes, or for reporting to the stock market (consolidated financial statements in US GAAP or IFRS), but VAT taxation and administration is done at the legal entity level. Check the part of the video again where the "supply chain" is discussed. Ultimately, the consumer is charged with the VAT. Anything that happens before that in the supply chain is one company charging and the other one reclaiming, i.e. a "zero sum" game for companies that are VAT registered. So, to finally answer your question, they "pay twice" and "reclaim twice", net VAT charge to company is zero.
Am I the only one here because of a school project?
Probably not. Thanks for watching either way!
This seems pointless. Doesn’t it just cause inflation equal to the vat?
Well, it's a choice that a country needs to make... does a government raise its tax income by direct taxation (taking it out from people's wages through an income tax) or indirect taxation (VAT or sales tax on goods and services). Once VAT is in place (and it has been in place in many countries for decades), only an increase of the VAT rate would cause inflation (with inflation defined as increase in price levels). In my country of The Netherlands, we have had an increase in VAT rates in recent years in return for lowering income tax levels. So I am basically paying the same amount of total taxes this year as I did a few years back, but at a different point in time, as it is shifting from when I "make money" to when I "spend money".
@@TheFinanceStoryteller Does the Netherlands have a UBI system in place which the government's VAT contributes to?
No, we don't have a UBI system (yet), but there are plenty of income support / poverty reduction programs that to an extent serve a similar purpose.
Inflation only comes from printing money
In monetary economics, the equation of exchange (algebraic formulation comes from Irving Fisher, 1911) is the relation: M ⋅ V = P ⋅ Q (M times V equals P times Q) where, for a given period,
M is the total nominal amount of money supply in circulation on average in an economy.
V is the velocity of money, that is the average frequency with which a unit of money is spent.
P is the price level.
Q is an index of real expenditures (on newly produced goods and services).
So if you increase the amount of money (“print money”) while the velocity stays the same and the amount of goods and services stay the same, then indeed you increase the price levels.
Jokes on you, our government (Bulgaria) adds tax to charities :)
Yeah there's called donors tax
As long as Andrew Yang taxes only the conglomerate tech companies, then I will vote for Yang. He better not be VAT-ing small businesses. Holy cow, can you imagine all the administrative work involved??
I cannot comment on the US situation, but being the owner of a VAT- registered company in The Netherlands, I can tell you that in my case it involves minimal work. It all depends on IT system setup.
VAT is also charged in South Africa. If what Trump calls a shithole country can figure this out, I'm sure the oh so very clever Americans can too.
So it's 200 euros out of 480 is taxes for that product to the end consumer
Incorrect. VAT is 20% on top of the 400 Euros, so 80 Euro VAT. You need to take the net amount between Output VAT and Input VAT.
@@TheFinanceStoryteller Thanks.
Basically it causes inflation.
Does it print money? If not then it doesn't cause inflation.
@@Wes-Tyler prices getting higher is a sign of inflation
@@clateyclatey114897 smh
Read My LIPS, NO NEW TAXES!
In example, MANUFACTURING gets $100, while govt gets $200 (20+40+60+80) for ZERO role in the process.
no, government only gets $80
@@ХейХей-ю3ф What you not understanding is the input VAT is refunded to the merchant along the chain, only the output VAT is what government collects, Its a tax on the value added along the chain. In the example video because 100 in value is added every time, Government collect 20 and refunds the rest !
@@ХейХей-ю3ф I come from a country that uses VAT and im telling you, your wrong !
@@ХейХей-ю3ф It does not cost 480 with VAT, VAT is just a more efficient way of collection, the input VAT% is always subtracted and refunded to the merchant !