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Advantages and Limitations of VAT
Advantages of Value Added Tax (VAT)
- As compared to other taxes, there is a less chance of tax evasion. VAT minimizes tax evasion due to its catch-up effect.
- VAT is simple to administer as compared to other indirect tax.
- VAT is transparent and has minimum burden to consumers as it is collected in small fragments at various stages of production and distribution.
- VAT is based on value added not on total price. So, price does not increases as a result of VAT.
- There is mass participation of taxpayers.
Limitations Of Value Added Tax (VAT)
- VAT is costly to implement as it is based on full billing system.
- VAT is relatively complex to understand. The calculation of value added in every stage is not an easy task.
- To implement the VAT successfully, customers, need to be conscious, otherwise tax evasion will be widespread.
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