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Question: Assume the production chain for an economy is characterized by the following transactions: Business Purchases Sales Mine $0 $200 Steel Mill $200 $1000 Car Maker $1000 $5000 Car Dealer $5000 $11000 Assume further that the only transaction where a non-business is involved is in the sales of cars from car dealers to individuals.

a. If the mine is subject to a 10% value added tax (VAT) how much would it pay in taxes?

b. If the car dealer is subject to a 10% retail sales tax (RST), how much would it pay in taxes?

c. How much revenue does a 10% VAT collect ? Compare the revenue received from a 10% VAT to a 10% RST.

d. In your opinion, which is the more sensible system a VAT or a sales tax? Why? (Be sure to include a discussion of compliance costs, administrative costs, uniformity and transparency in your answer.)

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Basic Finance, Finance

Category:- Basic Finance
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