Hi Spotted - What if you had huge capital expenses, like Intel trying amortize a billion dollar semi fab over 5 years, when it's obsolete in 4 years ? Income tax allows depreciation, VAT doesn't.
What if you had massive R&D expenses, like a drug company - say Bristol-Myers Squibb, which has not had any blockbuster drugs like Lilly's Paxil or Pfizer's Lipitor to bail it out ? Essentially , they (Bristol) hit a string of dry holes. But I feel it is still worth exploring their area of expertise, which is mostly cancer drugs. No R&D deductions under VAT.
So Bristol will pay the same tax as a generic drug maker who does very little R&D.
Tax systems are matter of trading off flaws, fairness, simplicity, revenue stability, and economic effects. Trade off is such that we are luck to get half a loaf on one item, and hope the rest aren't too lousy.
I think VAT has advers economic effects, and this hurts growth. In many ways I think that the worse trade off, becaue it constrains the future.
That said, there is a lot to be said for simplicity. My 2000 IRS Form 1040 was 3/4 of an inch thick,, and on cheap laser paper. Way over 150 hours of my time. |
