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and sector production (35+70+100+30 = 235), and the net VAT of 25 coming from the net VAT paid by inputs offstage I (7) and by each sector stages (18), (= 7+5+10+3 = 25). So final sale value to consumers or households results 260 (= 235+25). Once again, this result is due to the forward tax burden incidence assumption and not by the cero net accountable liability for sector taxpayers.

Now, dealing with the measurement of tax burden, it should be emphasized that in Stage I the Agricultural Sector “paid” to the Tax Revenue Administration an amount of 5 by the net VAT liability; in Stage II “paid” 10; and Stage III “paid” 3. All firms producing corn and meat paid a total of 18.

Actually, the incidence of the tax burden can’t be observe in any of the numerical examples, because to know it the relevant question to be answered is what would have been the values added or the final prices of goods and factor of production services if VAT would not exist. If VAT would not exist, final prices (for consumers or households purchases) or the net values added in all stages would be very probably different to the ones indicated in the examples. They would depend on the tax burden shifting phenomenon, forward or backwards, that is, depending on demand and supply price- elasticity. Actually, this incidence does not matter at all in a usual study of sector tax burden; because the amount of 18 is tax revenue that certainly engrosses the Public Treasury just due to sector firms’ activities, which produce and sale corn and meat, allowing the government to obtain those 1819.

Essentially, all three previous examples have an introductory aim to review the invoice (liabilities - fiscal credits) VAT mechanism. However, they belong exclusively to those assumptions indicated in the title of this section 1). Figure Nº 1 shows the rationale of them20. Under the assumption of a domestic good sold only in the internal market, supply price-elasticity equal to infinite and demand curve of normal slope (negative), before VAT production - consumption level and price are indicated by sub-index 0. That is, production - consumption level of Qo and price Po. Introducing VAT levying the value added in the production of the good, the new supply curve (including the tax) determines the new equilibrium indicated by sub-index 121, that is, Q1 y P1. The tax reduces quantities (produced and consumed) in Q0Q1, rising price in P0P1. Government tax revenue is equal

19 Tax incidence is an important issue in the study of income distribution. In that case it won’t be irrelevant whether factor owners or final consumers suffer the tax burden and so how individual’s welfare will be affected (depending on income functional and personal classification). It will depend on factors property structure and consumption by deciles. But in this case the point is the measurement of the consolidate macro- sector tax statutory impact. However, it is highly probable that welfare of those that work or live on sector activities will be affected by the tax. At least by modifying markets dimension – no matter the possibility or not of tax burden shifting forward and backward opened to firms – in some way factor owners’ welfare belonging to those factors of production employed in the Agricultural Sector will be affected.

20 For a complete partial analysis approach of tax incidence depending on demand and supply price-elasticity in case of domestic goods and in case of tradable or commercial goods (importable and exportable goods or commodities), see Piffano (1983).

21 As is drawn in the figure the tax effect could also be indicated by moving the demand curve to the left and backward, like a “consumption tax”, due to the equivalence between both type of taxes (on consumption or on production) in case of a domestic good, as it was explained in foot note of table belonging to Case 1, that is: t’ = t / (1+t), where t is the tax rate levying the cost of production and t’ the tax rate levying the sale price (that includes the tax). However, as the VAT law assigns to the vendor or registered agent the tax payment responsibility (legal taxpayer), following the steps suggested by public finance theory (statutory incidence, burden shifting and, finally, economic incidence) all cases analyzed in this note will begin with the impact or statutory incidence of the tax. Reader should remember this while reviewing future examples.

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