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To: energyplay who wrote (51203)	6/22/2004 8:26:17 PM
From: jayhawk969	Read Replies (1) \| Respond to of 74559

So Bristol will pay the same tax as a generic drug maker who does very little R&D I don't think so, the profit margins and the COGS are entirely different. The drug maker will pay much more as he does today.

To: energyplay who wrote (51203)	6/22/2004 8:30:03 PM
From: Cogito Ergo Sum	Respond to of 74559

my bad I should have said personal income tax cut out... the corporations here (Canada) still can claim depreciation etc... Maybe our GST is a better VAT ? You are right a complete VAT would be less fair in those cases you cite.

To: energyplay who wrote (51203)	6/23/2004 8:35:25 AM
From: Louis V. Lambrecht	Respond to of 74559

energyplay - when talking about VAT, do you mean the Value Added Tax system? In that case, I don't follow you well. All taxes paid on purchases are booked as a credit which are balances by all taxes due on sales. A business only pays the balance taxes on purchases less taxes on sales. When buying a $5bil. plant, the taxes paid at purchase constitute a credit against which you balance the VAT collected from the sales to customers (can take years sometimes to break even). In the case of research, there is no VAT due for internal intellectual work, there is no VAT due on wages. A company which does research will indeed have to increase its sales price more than a generic drug maker with low added value/profits. If you look at the sales price tag that is: in fact, they get more VAT back from their customer. Which usually is another intermediary (pharmacist, hospital,...) which inturn would not care much for the VAT paid to the research company, as they, in turn, balance against their own VAT collected from sale to the end user. Opponents to the VAT only speak of the sales price tag. Say that VAT is 20%: when they sell for 120, they "have to pay" 20 as VAT taxes. What they forget, is that, from what they bot 120, they can deduct 20 from their VAT current account. IMHO, the VAT system is a consumation tax as only the end-user carries the burden. High margin companies are favoured vs. low margin companies. Taken to the limit, a low margin intermediary could even never break even if his fee is less than VAT paid less VAT collected. Hence, VAT penalizes low value added business. VAT system has flaws, all right, there is a business in fake billings, fake export companies (no VAT collected on exports) have ships circling around with rotten grain collecting export aids and marking up VAT due in every haven, .... no more than common bad practices which are not specific to VAT.