Principles of Taxation: Value Added Tax Notes

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Summary

VALUE ADDED TAX (VAT)
This document that explains value added tax,
a) Pillars of VAT
b) Registration of VAT
c) Advantages of VAT
d) Disadvantages of VAT
e) Basics of VAT

Brief Overview:

VALUE ADDED TAX
Value Added Tax was first adopted in France in 1954. This tax has been imposed also by other member countries of European Economic Community like Holland, Italy. Value Added Tax is a generalized tax on the gross income of a business less purchases from other firms. It is measured by the value added by particular firm and this is distributed roughly in accordance with each firm’s contribution to net national income.it is assumed that VAT is usually levied at a flat rate and it is great advantage in that it has an extremely broad base.
Value added tax, sales tax and turnover tax.
They all belong to one particular type of taxes and in case of all these taxes; the tax base is the sale price of goods. Sales tax can be simply defined as the tax which is levied by the government on the consumption of various goods and services. It can also be defined as the percentage added to the product and services from which the government earns revenue and do the welfare of the company. Sales Tax Rate in Kenya is expected to be 16.00 percent by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations. In the long-term, the Kenya Sales Tax Rate -VAT is projected to trend around 16.00 percent in 2020, according to our econometric models. Turnover tax is levied at each sales transaction. One good may be taxed many times in case of turnover tax because it is taxed each time a sale transaction takes place. Turnover may lead to increase in final sales value of the product to a great extent.
VAT is imposed on the net value added during a particular stage of production. As a result, the seller is liable to pay tax on the gross value less the value of products purchased from other firms.

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