Changes

The tax is paid at each stage of production, but a credit is received for tax paid on inputs.  For example, assuming a VAT rate of 10%, if a company sold its product for $100.00 and the cost of inputs to make that product were $80.00, they would have to pay $10.00 less an input credit of $8.00 to account for the VAT paid by their suppliers.

The tax is paid at each stage of production, but a credit is received for tax paid on inputs.  For example, assuming a VAT rate of 10%, if a company sold its product for $100.00 and the cost of inputs to make that product were $80.00, they would have to pay $10.00 less an input credit of $8.00 to account for the VAT paid by their suppliers.

While some conservatives may mistakenly assume that the VAT tax is "more optimal" because it is a regressive tax, in reality, the VAT tax is similar to a corporate net income tax, except broader in the sense that certain items like labor, rent, and capital, for which a VAT tax has not previously been paid on, are not deductible.<ref>[http://www.taxpolicycenter.org/taxtopics/encyclopedia/VAT.cfm Tax Policy Center - VAT]</ref>  [[FairTax]], which supports a national sales tax, is opposed to a national VAT tax.<ref>[http://www.fairtax.org/site/PageServer FairTax]</ref>

While some [[conservative]]s may mistakenly assume that the VAT tax is "more optimal" because it is a regressive tax, in reality, the VAT tax is similar to a corporate net income tax, except broader in the sense that certain items like labor, rent, and capital, for which a VAT tax has not previously been paid on, are not deductible.<ref>[http://www.taxpolicycenter.org/taxtopics/encyclopedia/VAT.cfm Tax Policy Center - VAT]</ref>  [[FairTax]], which supports a national sales tax, is opposed to a national VAT tax.<ref>[http://www.fairtax.org/site/PageServer FairTax]</ref> In the UK at least, conservative governments have tended to raise VAT. [[Margaret Thatcher]]'s government raised VAT to 17.5% in the 1980s; the Labour government temporarily lowered it to 15% following the [[credit crunch]] in the 2000s; and now [[David Cameron]]'s Conservatives have raised VAT to 20%.

In the UK, certain goods deemed necessities, such as [[food]] and children's [[clothing]], are exempt from VAT. However, this exemption has tended to lag behind societal change, so that many products that most people would now consider necessities, such as [[telephone]]s and certain hygiene products, are not VAT-exempt.

In the UK, certain goods deemed necessities, such as [[food]] and children's [[clothing]], are exempt from VAT. However, this exemption has tended to lag behind societal change, so that many products that most people would now consider necessities, such as [[telephone]]s and certain hygiene products, are not VAT-exempt.