Business executives give VAT a thumbs down
The Tax & Accounting business of Thomson Reuters has announced findings from a recent Sabrix survey on the impact a value added tax (VAT) would have on American businesses. The majority of executives polled are against VAT and agree that it would significantly increase the cost of compliance.
The survey conducted in June and July of 2010 polled 80 tax executives within various business sectors. Their responses indicate the following:
- 83.5 percent believe that a VAT would significantly increase the cost of compliance
- 76.3 percent are against a VAT policy in the United States
- 67.1 percent of businesses currently do not have any infrastructure (technology, people or processes) in place to comply with VAT in the United States
- 16.5 percent currently have in-house expertise to comply with VAT in the United States
- 82.1 percent of businesses need six months to two plus years to prepare for VAT in the United States
- 51.3 percent believe the streamlined sales tax (SST) initiative has a better chance of success than VAT in the United States
VAT is a tax on the estimated market value added to a product or material at each stage of the manufacturing or distribution process, which is ultimately passed on to the consumer. Like a sales tax, businesses will be burdened with collecting the tax on behalf of the government.
"For affected businesses, achieving compliance with a new VAT would require considerable time, money and effort," said Carla Yrjanson, vice president of Tax Research and Content for Indirect Tax, Thomson Reuters. "For example, in 2008 a simple VAT rate reduction in the United Kingdom was estimated to cost businesses $465 million over two years. Now multiply that amount by initial infrastructure costs as well as an overall economy that is roughly six times that of the UK economy and you can get a sense for just how much it will cost American businesses."