{"id":3626,"date":"2019-06-09T13:30:21","date_gmt":"2019-06-09T13:30:21","guid":{"rendered":"https:\/\/www.weetas.com\/insights\/?p=3626"},"modified":"2019-06-10T06:29:15","modified_gmt":"2019-06-10T06:29:15","slug":"vat-effect-inflation","status":"publish","type":"post","link":"https:\/\/www.weetas.com\/insights\/en\/vat-effect-inflation.html","title":{"rendered":"The VAT effect: does the value-added tax accelerate the inflation rate?"},"content":{"rendered":"

We can all safely agree that no one likes to pay taxes; even though it is often cited as one of the unchangeable facts of life, and despite its vital role in building up a well-functioning modern community – given the ruling political system is healthy, most of us are reluctant to do it.\u00a0<\/span>However, being obligated to pay a cut of your money is not the only reason people do not like taxes. Some studies and speculations have been suggesting that levying taxes can have negative side effects, like the VAT effect on a country\u2019s inflation rate.<\/span><\/p>\n

Now that it has been levied in the Kingdom of Bahrain, we try, through discussing the nature of the value-added tax and its measured impact of the value-added tax on other countries which levied it before, to figure out how much it can stimulate the inflation rate.<\/p>\n

What is the Value-added Tax?<\/b><\/h2>\n

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There are two major known types of consumption taxes: sales tax and value-added tax. As its name implies, sales tax is a directly imposed on the sale of a good or service to its final user or consumer. <\/span><\/p>\n

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On the other hand, the Value-Added Tax is an indirect tax; that is, it is levied individually on each level and point of producing and distributing the goods and services and thus calculated incrementally rather than being imposed only once on the end user.<\/span><\/p>\n

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The tax was designed to compensate for the public services and infrastructure utilized during the production and distribution of these goods and services. While the standard rate for the tax is <\/span>15%, <\/b>several states have chosen to impose it with reduced rates; VAT has been imposed in Saudi Arabia, Bahrain and UAE at the rate of <\/span>5%<\/b>.<\/span><\/p>\n

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The remaining GCC countries are expected to follow suit according to the Unified VAT Agreement they signed back in 2016 which obligates them to levy a <\/span>5%<\/b> value-added tax.<\/span><\/p>\n

What are the pros and cons of Value-added Tax?<\/b><\/h2>\n

Like the sales tax, the value-added tax has its own set of advantages and disadvantages:<\/span><\/p>\n

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