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10

curve that supply faces. That price already takes into account the existence of the Tax on Export, which was omitted in the figure for simplicity.

Figure Nº 3

Price (P)

Supply Price with VAT (or without border adjustment) Supply Price without VAT (or with border adjustment)

C

A

B

Q1

Q0

Price Net of Tax on Exports

Quantity (Q)

P0

  • 0

    IC

P

1

VA

VAT inc VAT exc

IC

VA

VAT)

Liability F. Credit T (Net)

TB

[1a]

[1a]

[2]

[3]

[4]

[5]

[6]

[7]

[8]

70

7

11

7

4+1

7%

100

10

21

11

10

10%

30

3

24

21

3

10%

200

20

56

39

18 -17 1

TB=1/200= = 0,5 %

STAGE I: Land labors

117

105

35+7

STAGE II: Harvest labors and Cattle feeding

226

205

105

STAGE III: Trading

260

235

205

But now introducing border adjustment that implies the rebate of tax revenue levied on goods that are later export, the Agricultural Sector faces back the original price P0. The direct effect of VAT (dealing with the tax revenue on exports) disappears and also the excess burden supported by producers does. Table corresponding to Case 5 shows a simple simulation, which maintains the original assumptions of Case 3.

Result with “saldo técnico” included Adjustment in Frontier (Rebate of VAT) Final Result without devolution of “saldo técnico”

Note: decimals are omitted except in TB; little differences are due to calculus simplifications.

Case 5: Agricultural Sector production sold totally abroad with border adjustment (rebate of VAT for exports)

STAGE

AGRICULTURAL SECTOR (CORN AND MEAT)

PV

Invoice System

T

(Additio

n

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