November 24, 2020

worldtibetday

Advocacy. Mediation. Success.

The Right Sources in Money Taxation Deals

It is an important source of money for the state and has been the cause of fierce political disputes for decades. This is not just because baby diapers are still taxed more heavily than cat food.

A receipt with the reduced (7 percent) and the regular VAT rate (19 percent)

In the first weeks of 1968 there was great perplexity in the car dealerships of the republic. In the Mercedes-Benz Salon, the price tags were missing in early 1968. Audi, Fiat and Ford showed their prices in the Hanseatic city “ex works”. Only at Renault was the addition “including VAT” on the price tags from New Year. to read. Because: On January 1st, 1968 value added tax was introduced in its current form in the Federal Republic of Germany.

  • The “VAT rate” is now 19 percent and applies to the sale of goods and services. The VAT is part of the price and is paid by the buyer, but must be paid by the seller to the tax office. The reduced tax rate of seven percent applies to groceries, flowers, books, public transport tickets, etc. Most medical services (exceptions are, for example, cosmetic operations) are exempt from tax.
  • When it was introduced in 1968, the standard rate was ten percent, everyday goods were taxed at the reduced rate of five percent. By the end of 1967 there had already been a “sales tax”, but its rates were significantly lower – most recently at four percent.

The big disadvantage of the old sales tax was that it had “cumulative effects”. From wholesaling to intermediate trade and retailing: every time goods are bought or resold, sales tax was levied – and passed on to the next trading partner. For example, until a pound of coffee had reached the supermarket shelves, it could happen that sales tax was added several times to the value of the goods and was therefore included several times in the sales price.

The new “VAT” is deductible

That is why the most important innovation in 1968 was that VAT (which by definition represents a specific form of VAT) was “pre-tax deductible” for companies and the self-employed. So whoever made a business expense received the VAT included in the price back from the tax office upon presentation of the corresponding receipt. The amount no longer had to be added when goods were resold.

Conclusion

The car dealers got their cars delivered directly from the factory, the cumulative effects of the elimination of sales tax were manageable. Therefore, at the beginning of 1968, many of them hesitated, out of consideration for private customers, to show the actual price increase due to VAT. Other industries, however, made a virtue out of necessity: At this time, a large, red “V” for “input tax” was stuck on many taxis. A note for business customers that VAT was shown separately on the receipt.