Value Added Tax Savings

Value Added Tax Savings or VAT Savings is a general consumption tax that is collected incrementally, based on the value added.
VAT is collected at each stage of production. Value Added Tax (VAT) is imposed on most supplies of goods and services that are bought and sold.

 

Savings with VAT

One of the best reasons for instituting VAT is that it encourages savings among the people. Value Added Tax falls under the general category of a consumption tax, i.e., taxes on what people buy rather than on their earnings, savings, or investments.

Value Added Tax results in increase in the prices of the products, wherein the final consumer has to pay more. Producers and distributors typically pass the cost of the VAT on to the final consumer in the form of price increases. The structure is such that, Tax is added to a product’s price every time it changes hands until delivery to the customer takes place, thus paying final tax.

VAT’s discourage consumption because they raise the prices of goods and services. This will no doubt boost the habit of saving in the minds of people.

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