A value-added tax (VAT) is one levied on goods and services at each stage of production and distribution. For example, instead of a buyer paying a 10 percent retail tax on a record player, VAT would be collected in bits and pieces at each stage of production - first from the makers of the record player's components, then from the firm that assembled it, then from the wholesalers, and finally from the retailer.
Each firm involved in the chain of production would add the 10 percent tax to the value of the goods it sells and bill its customers for the total including the tax. The entire tax is ultimately passed on to the consumer - that's us - at a proportionately higher price.
VAT was introduced in France in 1954 and has been adopted by the Common Market members, including Great Britain. It is a regressive tax that hits low-and moderate-income people, who spend a large part of their income on consumption, such as food, harder than the rich. It is also a highly inflationary generating type of tax.
VAT is not necessary in the United States, where compliance with income tax is excellent, compared with countries like France and the Philippines that have always had a high incidence of income tax evasion.
All governments need revenues to finance "public services". If our government, i.e., political leaders were not so corrupt and greedy, if they operated the government in an efficient manner, if they collected income tax and property tax that people are required by law to pay, there would be one need for VAT!
But our fine government, under the leadership of President Arroyo, believes VAT will solve all our problems. Especially having VAT on food, medicine and clothing.
I'm sure GMA and her whiz kids are trying to figure out how they can place a tax on air - after all, air does have a value: It allows us to stay alive!
Alex Lee Lapu-Lapu City