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
Supply Price with VAT (or without border adjustment) Supply Price without VAT (or with border adjustment)
Price Net of Tax on Exports
VAT inc VAT exc
Liability F. Credit T (Net)
18 -17 1
TB=1/200= = 0,5 %
STAGE I: Land labors
STAGE II: Harvest labors and Cattle feeding
STAGE III: Trading
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)
AGRICULTURAL SECTOR (CORN AND MEAT)