The vast majority of U.S. business executives are against the imposition of a value-added tax and would need time to prepare for it, according to a new poll.
A VAT is a tax on the estimated market value added to a product or material at each stage of the manufacturing or distribution process, which is ultimately passed on to the consumer.
The Tax & Accounting business of Thomson Reuters polled 80 tax executives within various business sectors, and found that 83.5 percent believe that a VAT would significantly increase the cost of compliance for their companies. In addition, 76.3 percent of the executives said they are against a VAT policy in the U.S., and 67.1 percent of them currently do not have any infrastructure (including the technology, people or processes) in place to comply with a VAT in the United States.
The survey also found that only 16.5 percent of the executives polled currently have in-house expertise to comply with a VAT in the U.S., and 82.1 percent said they would need anywhere from six months to more than two years to prepare for a VAT in the U.S. In addition, 51.3 percent believe the Streamlined Sales Tax Initiative has a better chance of success than the VAT in the United States.
For affected businesses, achieving compliance with a new VAT would require considerable time, money and effort, said Carla Yrjanson, vice president of tax research and content for indirect tax at Thomson Reuters. For example, in 2008 a simple VAT rate reduction in the United Kingdom was estimated to cost businesses $465 million over two years. Now multiply that amount by initial infrastructure costs, as well as an overall economy that is roughly six times that of the U.K. economy, and you can get a sense for just how much it will cost American businesses.
