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3

VAT inc VAT exc

IC

VA

VAT)

Liability F. Crédit

T (Net)

TB

[1a]

[1b]

[2]

[3]

[4]

[5]

[6]

[7]

[8]

STAGE I: Land labors

77(5)

70

10+2(6)

60

6

7(7)

2(8)

5(9)

8%

STAGE II: Harvest labors

110

100(10)

70

30

3

10(11)

7

3(12)

10%

Invoice System

Case 1: Corn production sold to domestic demand only

STAGE

PV

CORN

T (Addition

Trading

121

110(13)

100

10

1

11(14)

10

1(15)

10%

100

TB = 10%

28

19

9

9%

STAGE III:

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

5 It is assumed that land labors are levied with tax rate t = 10%. VAT liability – that levies the accumulated VA in this first stage - results 7; that is, 70 * 0,10 = 7. Sale price in this stage with VAT included is estimated as (10+60) * 1,10 = 77.

6 The final production value of inputs - like fertilizers, agro-chemicals, etc. - with VAT included, is equal to 12, composed by a value added of 10 and the VAT that is assumed levying inputs with the general tax rate 20% (10 * 0,2 = 2).

7 Notice that 7 is the fiscal liability resulting from levying sales or production of Stage I with tax rate t = 10%, excluding the VAT that burdens it and indicated in the column [1b], that is: 70 * 0,10 = 7. That result could also be estimated using the tax rate t’ = 9% levying the Production Value including the VAT paid by this stage (70 + 7; or 77 * 0,09 = 7); because, t’ = t / (1+ t) = 0,10/1,10 = 0,09. (Take into account previous warning about calculus simplifications).

8 This is the fiscal credit of Stage I due to the VAT incorporated in input invoices, and levied with the general tax rate 20% (10 * 0,20 = 2) already mentioned.

9 Correspond to the net VAT that results from the difference between the fiscal liability and the fiscal credit of this stage, which is lower than the one resulting from levying the VAT tax rate 10% the Value Added in the “Addition” VAT modality, as it was defined before (60 * 0,10 = 6) and indicated in column [4]. This makes possible to realize that calculus result applying Addition VAT is different to the one resulting from the Invoice System due to the incidence of the higher fiscal credit of the previous stage, where the tax rate is twice the one levying the sector chain.

10 The production value 70 of Stage I (column [1b]) is the intermediate consumption of Stage II, which production value without VAT results 100 after adding the value added 30 corresponding to the stage.

11 Once again, fiscal liability of 10 could be obtain levying with the tax rate 10% (that is assumed burdening the harvest) the production value of Stage II excluding the VAT that burdens it – indicated in column [1b] – that is, 100 * 0,10 = 10; or, using the tax rate t’ = 0,09 levying the production value of Stage II including VAT that burdens the stage, that is, 110 * 0,09 = 10.

12 In this stage the equalization between both VAT systems (addition and invoice) is verified, due to similar treatment of the accumulated value added of the two stages (see column [4]).

13 Production value 100 of Stage II (column [1b]), is the intermediate consumption of Stage III; which production value without VAT is 110; that is, summing that intermediate consumption to the value added 10 corresponding to the stage. Notice that 110 is also the accumulated value added of inputs of Stage I plus value added of Stages I, II y III, that is, 10+60+30+10 = 110.

14 Once again, fiscal liability 11 can be obtained levying the tax rate 10%, that burdens the trading activity for final consumption the production value of Stage II excluding the VAT that burdens it - indicated in column [1b] – that is 110 * 0,10 = 11; or, levying with the tax rate t’ = 0,09 the production value of Stage III with VAT included, that is, 134 * 0,09 = 11).

15 Like in the previous stage, similar result is obtained from the Addition and the Invoice VAT Systems (see column [4]).

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