A report on Value-added tax, Regressive tax and Tax

A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally.

A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases.

Payroll taxes, such as FICA and Unemployment Insurance in the United States, and consumption taxes such as value-added tax and sales taxes are regressive in that they both raise prices of purchased goods. Lower-income earners save and invest less money, so pay a larger proportion of their income toward these taxes, directly for sales tax and as the price increase required to make revenue covering payrolls for payroll taxes.

Since governments also resolve commercial disputes, especially in countries with common law, similar arguments are sometimes used to justify a sales tax or value added tax.

The incidence of taxation varies by system, and some systems may be viewed as progressive or regressive.

Some critics consider it to be a regressive tax, meaning that the poor pay more, as a percentage of their income, than the rich.