Other Broad-Based Consumption Taxes

Abstract

Chapter 3 reviews broad-based consumption taxes with which the VAT can be compared, especially the retail sales tax (RST). The Profit & Loss (P&L) Account forms the basis for explaining how the tax liabilities under the various variants are computed. The accounting matrix is also used to note the similarities to and differences from a conventional business income tax whose profits are ascertained on the basis of the matching principle. Subsequently, the practical differences between the taxes are discussed, as well as their prevalence around the world. A brief section on the major lessons from worldwide experience with VAT concludes.