Value-Added Tax (VAT) explained

What do you know about (VAT)? Do you think there are opponents of VAT?
  
And do you think that if there is an alternative for it?

VAT is a type of consumption tax that is placed on the raw materials gradually in every stage of production once. This VAT the manufacturer doesn’t bear it the consumer is the only person who bears it.

Also, it’s noticeable that the government imposes this VAT for obtaining revenue.

FOR EXAMPLE:

The government imposed a 10% VAT, so in the 1st  when a manufacturer of air conditioning purchases the raw materials from a provider, in this stage the manufacturer will give him 1$ (for example) plus a 10 cents then the provider pays 10% VAT to the government.

In the 2nd stage, the manufacturer sales his products to retailers at a price 2$ plus a 20 cents, 10 cents goes to the government and the other 10 cents reimbursing it for the VAT that previously paid.

At last, the retailers will sell these products at a price 3$ plus a 30 cents to the consumer, 10 cents goes to the government and the other 20 cents reimbursing it for the VAT that previously paid.

There are two kinds of people, those who support VAT and those who refuse VAT.

Now I will explain to you why the people who support VAT took the decision to support and why the people who refuse VAT took the decision of rejection.

-The people who support VAT took the decision of support based on several Points:

1.   Vat encourages proper payment of taxes and prevents from tax evasion.

2.   It is the only way for businessmen to reimburse what has been paid previously in the first stage in production.

3.   It is considered as an alternative to hidden taxes which are imposed on some stages of production without the consumer’s knowledge, so this tax is causing price rising and the consumer is the only one who bears these taxes.

-the people who refuse VAT took the decision of rejection based on that these taxes form a burden on the people who have lower incomes.so the government working on grant exemptions to the VAT on groceries and children clothing. 

-Now you have asked yourself if there is an alternative for VAT.

Of course, there are several alternatives that work on for obtaining revenue such as:

1.   Eliminate the monopoly of the telecom market:
     we know that the telecom Egypt monopolizes the telecom market in addition to the poor service which is expensive, so when we eliminate this monopoly the government revenue will rise because of the competition that works on reducing the prices of service so with high quality.

2.   Reduce the cost of energy  in ways other than government subsidies:
     actually, the issue of high electricity prices is complex more than we think because of there are several reasons that work on price raising I will give you some examples:

·        The government monopolizes electricity generation; there should be competition in generating electricity to stimulate the prices reduction, virtually the manager of the budget sector in Egypt aluminum company offered a suggestion to build private company in generating electricity but high oil & gas prices will lead to the loss of the company in addition to borrowing from banks that have high-interest rates, so this company didn’t arise.

After that, he suggests relying on coal or junks as an alternative to oil & gas in the operation of factories.

Also, the government must give the private sector the power to build and own these private companies and distributing electricity across the region, all of that will boost economic growth and increase government revenues.

·        High-interest rates: the government recently has floated exchange rate which leads to high-interest rates

·        Apply the VAT.

3.   Reduce taxes: the government thinks that taxes lead to achieving more revenue, it was so wrong because of these taxes become a disincentive to investment but reduce taxes stimulate investment and the revenue will increase and also works on reducing unemployment.