Question

Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT). If the government imposes a VAT rate of 10 percent, the government will receive ___________ in VAT revenue per loaf of bread sold and the final consumer will find that he has to pay _______________ more for a loaf of bread than he did prior to the VAT tax.

Answer 1

Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT). If the government imposes a VAT rate of 10 percent, the government will receive 0.10% plus the cost the goods in VAT revenue per loaf of bread sold and the final consumer will find that he has to pay an amount more for a loaf of bread than he did prior to the VAT tax.

Step-by-step explanation:

A value-added tax (VAT) is a consumption tax levied on products at every point of sale where value has been added, starting from raw materials and going all the way to the final retail purchase. Ultimately, the consumer pays the VAT; buyers at earlier stages of production receive reimbursements for the previous VAT they've paid (Maverick J.B. 2019) .