In 2010, we are subject to, Value Added Tax, Import Duties, Excise Tax, Environmental Taxes, Corporate Taxes and the list goes on. However, one must not forget the purpose of these taxes. In short, they are a source of revenue for the Government. Without them, the Government would not be able to pay its public servants, improve on infrastructure (roads hospitals, schools etc) and run the country. In other words, the revenue from taxes is what is used to run the country. But how much tax is too much?
With America considering the implementation a Value Added Tax as a possible source of revenue for their new healthcare reform, many ask themselves and the US Government, if this is the right way forward. How will this affect not just Americans, but the rest of the world? Will other countries become more competitive in the world market? Will this raise the cost of production worldwide?
How these tax rates relate to economic growth should be considered. Some claim that a reduction in the tax rate will lead to increased economic growth and prosperity. Others believe that if we reduce taxes, almost all of the benefits will go to the rich, as those are the ones who pay the most taxes. According to the Honorable PM Skerrit, “The implementation of VAT along with decreased income tax, allows for Dominicans to have more control of their finances.” Dominica’s implementation of a 15% VAT in 2006 has contributed to a steady growth of GDP (3% in 2008), and this is during the world financial crisis.
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