Show I BUSINESS end the STOCK MARKET by hv B BABSON'S REPORTS Cop Copyright 1972 1971 TH THE V VALUE ADDED LUE TAX The White House continues to study the feasibility of the value-added value tax VAT a system being used increasingly to raise government revenues in hi Europe Latest word is that Administration aides feel the President is favorably inclined toward the Idea and may submit it to Congress after the election in November In essence VAT is a general sales tax though it differs from any such imposts now in effect in the United States It Itis is collected bit by bit proportionate to the value added added as as products pass through the various manufacturing and distribution stages Each seller receives credit for the tax he has paid to the manufacturer or processor from whom he bought So in the end it is the consumer consumer con can sumer who be bears rs the full brunt of the levy In rn order to to tone down this blatantly regressive feature of VAT and make it more palatable to consumers a system of tax personal credits and rebates rebates re reo re- re bates would be set up Also stress would be placed on VATs VAT's overall revenue revenue- raising potential along with the proposal pro that these revenues be earmarked for support of public elementary and secondary education VAT VAT has a number of facets likely to I pique the interest of Senators and Congressmen Congressmen Con Can gressmen and ultimately incline them in favor of enacting it For one thing it is an indirect levy unlikely to set off the great hue and cry that would be raised if Income tax income tax ome-tax tax rates were to be lifted appreciably q or current deductions phased out It scoops up large sums best is that a 1 per cent levy would bring in about 5 billion requires requires' re requires re re- quires quires' only minimal enforcement ap ap- And a very Important p point int at this time time-it encourages exports which could help right our lagging foreign trade balance In addition VAT VAT- which presumably would be advanced as a partial substitute substitute substitute sub sub- for onerous corporate income levies has considerable appeal for businesses businesses bus bus- messes especially those engaged in scale large-scale import and export opera opera- Some Obvious Drawbacks On the surface VAT would appear to forward system of raising the added revenues that Uncle Sam so urgently needs But Dut when you get down to the gritty nitty-gritty you discover that it could be extremely complex and its Us impact on various segments of th the economy uneven VAT Is Ls often referred to as as a neutral tax the implication being that it is neutral as between management and la labor labor labor la- la bor and between various types of companies companies com com- panics and industries This would betrue betrue be betrue true if all aU goods and services where to tobe tobe tobe be taxed at a uniform VAT rat rate However How ever this has not been the case in Europe Eu Eu- rope where rates differ from prod product t to product It is not likely to be the case in the United States where Congress Congress Con Con- gress has a II long history of writing complications and exceptions into tax legislation seemingly for v valid lid social and reasons but often Jo to 0 appease pressure groups The rhe Research Department of Babson's Dabson's Babson's Bab- Bab sons son's Reports feels that the big hassel in Congress over VAT wont won't come until some time in 1973 Despite its potential potential poten poten- as a 11 revenue rais raiser r VAT faces h hard fd going in both Houses j it will be hotly as sailed for its discrimination against mid income die people Yet when all the chips ar are down dawn the expanding need for revenue and the fact that V VAT T is less regressive than most levies will outweigh its obvious inequities It will pass and wont won't bite too hard at first But Hut eventually the base will be upped as new social programs program pyramid and must be 00 funded by py y tax tax- payers |