A report on Value Added Tax Essay -- Economics

A report on valuate Added TaxIntroductionValue Added Tax originated in France in 1954 and is underimplementation in more than hundred countries. Value Added Tax isperceived by many as performer to promote neutrality and uniformity of taxburden and to provide incentives for increased productivity andindustrialization. The spread of VAT to the developed and thedeveloping countries alike certainly, makes for an interesting study. monetary propagation (London) too stressed the growing importance of VATwhen it observed in its centennial review The economic andtechnological changes of the second half of the blow deliver made VATthe quintessential modern tax. It will not be an exaggeration if onewere to say that the emergence of the VAT as an important and elasticsource of revenue over the last four decades is unparalleled in thehistory of receipts.Despite the widespread proclamation of VAT, there have beendifficulties in implementing VAT in its true spirit like in the caseof Argentin a, Brazil, Canada and India. VAT has been introduced inmore than 120 countries developed, developing and those economies,which are in transition. There have also been attempts to introduceValue Added Tax in USA, which however has preferred to retain theRetail Sales Tax system. Yet, those difficulties notwithstanding, itcan be said that Value Added Tax system definitely has its advantagesand is certainly recommended for most economies, particularly thedeveloping ones.DefinitionValue Added Tax is a tax on the value added at each stage ofproduction and distribution process and can be aptly defined as one ofthe forms of consumption taxation since the value added by a firmrepresents the difference between its receipts and cost of purchasedinputs.Need for VATValue Added Tax is one of the most original reforms that have beenproposed for the Indian economy after years of political and economicdebate. The reasons for advocating Value Added Tax is that it willreplace a complicated tax soci al structure that will also do away with thefraudulent practices. Following are some of the most importantbenefits if VAT is introduced. VAT will encourage and will in a better-administered system thatwill close avenues of tax evasion. The taxpayers will also becompelled to keep proper records of their sales and purchases. VAT... ...centerfor the revenue sledding for states from the change over. The center hasensured that this will not be so and has assured compensation in caseof deficits. If VAT system is adopted there would be no exemptions orincentives. This can adversely affect some business houses. To crownall this there was also political opposition fearing disfavor of the job community and the resulting political fallout.VAT the way forwardIn order to make the VAT a thorough success following could be a couple of(prenominal)suggestions.* The deadline for all legislations and computerizations should be same crossways the states.* VAT should be implemented by all the sta tes at the same time.* Laws regarding VAT should be uniform across all the states and there should be no disparity among the states.* There should be a monitoring mechanism at the central to overlook the new system.* A lot of changes have to be made in ancillary legislation (income tax, company law etc.) to ensure VAT compatibility.Bibliography1. www.ciionline.org2. The Indian Express dt. June 24, 20043. The Economic Times dt. 10-03-04, 15-06-04, 18-06-04 & 27-07-044. Magazines & journals