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[Value Added Taxes]
[52.2% of the voters in the August 27, 2002, referendum voted in
favor of this amendment. A 75% affirmative vote was required to pass the
amendment, so the amendment failed.]
8. Committee Proposal No. 01-13:
This proposed amendment would amend Section 3 of Article IX by
adding a new subsection (d). This new subsection empowers the national
government and the states "to levy value added taxes."
ANALYSIS:
This value-added tax (known as VAT) is intended to replace the
gross revenue tax and the import tax. It is probably fairer and is much more
progressive in its application than the current gross revenue tax. Under the
current gross revenue tax, an importer pays tax when merchandise is sold to a
store, and the store again pays tax when it sells the same merchandise to the
customer. Additionally, the gross revenue tax applies only to private
businesses and not to the government-affiliated businesses, giving the latter
an unfair advantage. The import taxes have the disadvantage of hampering
development of export-oriented businesses because these businesses must pay
taxes on the materials they need to expand their operations.
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The value added tax is a consumption tax and is levied on the
consumers of goods and services. Since this tax is spread across a large
portion of the population, it could be lower than other taxes. Export
businesses will benefit from this value-added tax because they will not pay
tax on goods they sell abroad. Additionally, they will receive value-added tax
credit for the tax they pay on materials they buy locally to manufacture the
goods they export.
The states are looking for new ways to increase their revenue
to adequately discharge their primary responsibility for funding education and
health services. This value-added tax is one such source of revenue that the
states may utilize.
Politically, the approval of this value-added tax might
diffuse the on-going friction between the national government and the states
regarding division of revenues collected by the national government.
© John R. Haglelgam, March 4, 2002
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