ADVANTAGES & DISADVANTAGES OF VAT

Updated on May 23, 2022

ADVANTAGES & DISADVANTAGES OF VAT

Customers tolerate VAT in the United Arab Emirates because it is a consumption tax. VAT is not borne by businesses. It is claimed in part through a system of deductions, in which taxable persons can abstract the VAT liability amount they paid to other taxable persons on business activity purchases.

Advantages of VAT

There will be no fluctuation in revenue from VAT because it is a consumption tax.
Unlike other indirect taxes, VAT is simple to administer.
Due to the catch-up effect of VAT, it reduces the likelihood of evasion.
Using VAT, a low tax rate generates a lot of revenue.
The burden on customers is kept to a minimal because the VAT is collected in tiny amounts.
VAT is a tax that can be levied on any sort of business because it is a neutral tax.

Disadvantages of VAT

The adoption of VAT is costly since the VAT is dependent on a full billing system.
Calculating value added at each stage is not a straightforward task. As a result, VAT is a confusing concept.
The essence of VAT is regressive. Poor individuals, who spend a larger percentage of their income, will be hit more than wealthier people.
There will be an increase in compliance costs if all purchase and sales records are not kept.
In order for VAT to be implemented successfully, consumers must be aware of it; otherwise, tax omissions will be widespread due to phoney invoices.