- Progressive VAT system involves wealthier individuals paying higher tax rates than those with lower incomes
- Traditional method of VAT involves exempting essential items from tax
- Challenges with classifying products for VAT exemptions lead to inefficiencies and distortions in competition
- Modern approach is to tax all supplies equally and provide welfare compensation to lower-income individuals
- Proposal suggests implementing a single-rate, broad-based VAT with real-time compensation for lower-income households to address regressivity in the tax system
Source: icaew.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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