Value Added Tax Act (VATA)
1. DEFINITION: Value Added Tax (VAT) is a general consumption tax assessed on the value added to goods and services. It is a general tax that applies, in principle, to all commercial activities involving the production and distribution of goods and the provision of services. It is a consumption tax because it is borne ultimately by the final consumer. It is not a charge on companies. It is charged as a percentage of price, which means that the actual tax burden is visible at each stage in the production and distribution chain. It is collected fractionally, via a system of deductions whereby taxable persons (i.e., VAT-registered businesses) can deduct from their VAT liability the amount of tax they have paid to other taxable persons on purchases for their business activities. This mechanism ensures that the tax is neutral regardless of how many transactions are involved. It is not collectable on exports to countries not associated with the Central Atlantic Free Trade Association.
2. RATES: VAT tax will have three rates depending on category of product or service.
Rate Band I. A 0% VAT tax will include following product and service categories:
a. Infant products (any product or service designed for use by children under 2 years of age, from diapers to daycare)
b. Educational products, materials used by Eutopian educational system
c. Basic foodstuff, namely: Bread, Milk, Flour, Water
d. Medicines
e. All medical services other than elective plastic surgery
Rate Band II. A 15% VAT tax will include following products and service categories:
a. Wedding rings over 10k, all other jewerly/gems over 1k
b. Major elective plastic surgery (doctors can define)
c. 2 door cars over 40k
d. Civilian vehicles over 60k
e. Houses not bought for rental or commercial purposes valued over 300k
f. All non business purchases of boats over 25k
g. TVs over 2500
h. Personal yard equipment over 1500
This rate will increase to 20% effective at the start of Term XII. (and to 25% at the start of Term XII.)
Rate Band III. All products and services not mentioned in rate bands I. and II. will be taxed at 10% VAT rate.
3. Exemptions: The goods and services which are exempted from VAT are listed in Appendix A. Exempted goods and services consist principally of financial activities. Exemption from VAT means that the persons engaged in the exempt activity are not liable for VAT on their receipts and are not entitled to a credit or deduction for VAT borne on their purchases. It is emphasized that no persons are entitled to receive taxable goods or services free of VAT simply because they are exempt from charging VAT on their supplies.
4. VAT Credit on Federal Income Tax: Federal Income Tax payers may receive a credit for VAT paid up to a lesser of VAT paid or 2,000 ducats less 10% of income from employment or self-employment.
