You have an error in how you calculate the business costs in the After VAT example.
The VAT on the importing and duty is initially paid by the business, but that is recouped when they collect the VAT on the final sale. VAT is a pass through tax. The final customer pays the total VAT cost. The business simply takes the total collected VAT, subtract the VAT paid by the business and pay the difference to the government.
If your markup is 33% then the $24 (cost plus duty) markup is $7.92 for a total of $31.92 and then the 7.5% VAT is applied to that price for $2.39 totaling $34.31.
The merchant made $7.92 the government now made $6.39 and the consumer saved $1.69
So the cost of good actually got lower and the revenues to both the business and government went down. If the price is still the same, then in this example, the store is actually using a higher markup.
How does this get published every week? She goes on and on like with the flow and points of a year 9 book report. She doesn't even come to a point anywhere in the article.
newcitizen says...
You have an error in how you calculate the business costs in the After VAT example.
The VAT on the importing and duty is initially paid by the business, but that is recouped when they collect the VAT on the final sale. VAT is a pass through tax. The final customer pays the total VAT cost. The business simply takes the total collected VAT, subtract the VAT paid by the business and pay the difference to the government.
If your markup is 33% then the $24 (cost plus duty) markup is $7.92 for a total of $31.92 and then the 7.5% VAT is applied to that price for $2.39 totaling $34.31.
The merchant made $7.92 the government now made $6.39 and the consumer saved $1.69
So the cost of good actually got lower and the revenues to both the business and government went down. If the price is still the same, then in this example, the store is actually using a higher markup.
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