ADVANTAGES & DISADVANTAGES OF VAT

 

VAT in the United Arab Emirates: VAT is a consumption tax because it is tolerated by the ultimate consumers.

VAT is not borne by businesses.

Through the use of deductions, taxable persons can abstract the VAT liability amount that they paid to other taxable persons on the purchase of business activities.

Advantages of VAT

There will always be money in the system because VAT is a consumption tax.
VAT is relatively simple to administer compared to other indirect taxes.
For this reason, VAT reduces avoidance.
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

VAT deployment is costly due to its need 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.

Due to their higher consumption of their income, the poor will be hit more than the wealthier.
There will be an increase in compliance costs if all purchase and sales records are kept.
Tax evasion will be widespread if consumers don’t pay attention to the installation of VAT because of phony invoices.
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