Question by Tiny280: In practice, does a Value Added Tax (VAT) favor larger companies over smaller companies?
With VAT taxes levied each time goods change hands, it would seem that a large vertically-integrated company would have a huge advantage in each stage of production over smaller companies which only engage in one stage of production.
For example, under a VAT structure, would a a vertically integrated Brewery which owns the farms to grow their own hops and barley have a cost advantage over farmers who just grow hops & barley, as well as other breweries who purchase their hops & barley from independent farmers?
The smaller companies would have the VAT added to their costs at various stages of production, while the vertically integrated companies would have the VAT levied only at the finished product stage.
Answer by raysor
Why? VAT is just a tax that is collected on behalf of the government. The only person who can lose is the ultimate, retail buyer (who pays all the VAT)
What do you think? Answer below!