Look at countries that actually have VAT. Germany for example has VAT at 19% rate, and it brings 6% of GDP to government budget. For Yang’s plan, he’d need more like 30% VAT. Of course this would be on top of already existing taxes.
Ok, but your previous post said "even if you are very optimist and assume that he’ll get exactly as much as he expects in taxes", so I was operating under that optimistic assumption. Was Yang planning to exempt any part of the GDP from his VAT? Genuine question but I didn't think he was.
Speaking of which, I googled Germany's VAT and it seems there are quite a few exemptions ("food, books, hotel accommodation, cultural services and other goods and services") that only get VATed at 7%, which is much closer to the 6% they apparently collect in practice. But sure, they probably do fail to collect quite a bit of what they theoretically could.
> Was Yang planning to exempt any part of the GDP from his VAT?
A lot of GDP is exempt from VAT by design. It's easiest to see if you look at the expenditure approach to GDP. For a simplest example, government expenditure is effectively exempt from VAT. Exports are VAT-exempt (though it only matters if you export more than import, because imports are subtracted in expenditure approach to GDP calculation). Another part of GDP effectively exempt from VAT is capital goods: when a business buys a piece of equipment, it technically pays VAT on it, but it also gets the same amount they paid as a credit for the VAT due on their own sales. The business gets to "consume" the capital good by utilizing it in production process, but doesn't pay any VAT for it on net.
Thanks, hadn't considered any of that. The exemptions of government expenditures and exports do seem inherent to any VAT, now that you mention them, but I wouldn't think the capital goods sales credit for businesses would necessarily have to be, would it?
