Jouni Osmala (josmala@cc.hut.fi) on 2/14/03 wrote:
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>For additional Finnish point of view.
>We have something called VAT but it fits in description of sales tax instead of
>VAT. Also, VAT has same meaning in brittain (probably) since its common for companies
>to give two prices for computers one with VAT and one without there.
That might not be the case. For a consumer is usually no difference, since he can't deduct. But the reason to quote prices without VAT is the when a company buys something with VAT, they usually disregard it, because if they sell more than they buy it's basically free. Let me put an example to clarify the situation.
Company A sells Gizmos.
One Gizmo is made out of 1 foo and some process they have.
So the buy 1000 foos at $100 each plus a VAT of 20%. So they actually pay $120.000 ($20.000 of VAT). They also buy two workstations for $5000 plus VAT. So they pay $12.000 in computers ($of which $2000 is VAT).
But they sell their gizmos at $200 each (plus VAT).
So their revenue is $240.000. Of those they should pay $40.000 in taxes if it was a revenue tax, or a sales tax. But since it's actually VAT they pay $40.000 - $22.000 thay they already payed when buying their inputs. So they don't mind about the VAT on things because they save that from the tax they pay on revenues. Consumers on the other hand do mind because that's something undeductible. It's like with deductible donations of companies. They do those because they would have to pay them either way.


>In Finland there is also petrol tax,and alcohol tax and tobacco tax. All of them are at least 2/3rds of final price)
>All that just to change consumers behaviour. For gas its save the world, for other
>two its paying public healt care by those who increase its usage.
Yep. Those are usually specific taxes. Theoreticallly, the reason to put them is to cover some inefficiencies of real life known as externalities. The problem is when someone does something, but that something has a non neutral influence on somebody else. Typical case, when your roomate likes to hear music you hate (negative externality) or love (positive externality). Of course other typical case is pollution. The companies that pollute usually don't see the whole cost because the pollution is spread through many people. So they make the pollution but only see the average. Not to mention when they can dump it on third world countries :-(
This may also help you understand why US decided to boycot the Kyoto protocol. It was kind of a bit bad for their economy, but great to the world. But can the rest of the world make them pay for their pollution? Aparently nope.
Anyway, in the case of petrol it's clear that it pollutes and if you only pay the production price you're not paying the whole pollution price. So you have to add that arthificially through taxes. That's also why diesel is usually taxed more than petrol, because it's considered to pollute more. Same can be said about tobacco and (to a lesser extent) alcohol. A bit of luxury tax can also be part of the equation since those are not basic necessity items. Petrol at least, most comercial transport runs on diesel and kerosene, and a lot of countries still consider a car a luxury. Difficult to imagine for an American, but on other parts of the planet the cities were planned for public transport.
But then there's the "other" reasons: those market are very inelastic (i.e. you can up the price a lot and the quantity sold goes down just a bit), are easy to levie taxes (you charge the big wholesale producers) and generate a lot of money for the government. I still remember emergency taxes on tobacco when there was an economic emergency in Argentina or on vodka on Russia. I guess you Finnish are closer to the latter than the former :)