Once thing I never understood about VAT- is it really only the consumers in these countries who pay taxes? Does Sweden and other European countries have some kind of way to tax businesses are is the consumer really getting screwed with all the taxes?

In the UK, everybody pays VAT, including businesses.

However, business are allowed to claim the VAT back on any purchases that they make.

This is a simplistic explanation, though: If a small business wishes to claim back VAT, then they have to charge VAT on their services/products. If they don't charge VAT on their services/products, they can't claim VAT back on their purchases.

Above a certain size, a business has no choice: they must charge VAT.

For a more in depth (and probably more accurate explanation), here's what the Inland Revenue have to say about the subject.

But isn't this still totally unfair to the consumer because rich businessman end up paying not much more VAT than lower income consumers? I mean sales taxes come mostly from the lower and middle class, it suprises mean that such left-leaning European countries would let rich people get away with only paying VAT taxes on what they buy.

Yep - and when you're paying 40% of your income as tax anyway it all starts getting a bit bl**dy expensive. Next election I'm voting the Tories back. I thought Labour would help (as my wife is a nurse, and they promised NHS improvements) but they are just a bunch of arse as kinda expected.

(sorry - feeling a bit snippy after a very strong Starbucks!!)

But isn't this still totally unfair to the consumer because rich businessman end up paying not much more VAT than lower income consumers? I mean sales taxes come mostly from the lower and middle class, it suprises mean that such left-leaning European countries would let rich people get away with only paying VAT taxes on what they buy.

If that were the only tax, yes it would sound a bit unfair. But the rich businessman will be paying much more income tax than the lower-income people, and his business will be paying corporation tax on its profits.

VAT is theoretically a tax on businesses: if a business buys raw materials for £X and makes from them products which it sells for £Y, it pays VAT on the difference, Y-X. That's why it's called Value Added Tax: it's a tax on value-add, on margin. Of course the perception is that it's a tax on consumers, because consumers see businesses buying supplies (computers, say) at the VAT-exclusive price, whereas technically they're paying the VAT-inclusive price but claiming back the VAT.

Peter

In addition to which, in the real world, if you tax businesses at every step along the way, that costs just gets passed on to the consumers. In the end, the consumer this way pays less money as a result of tax, even if it appears that they're the only ones getting taxed. (When, in fact, it's just the cost of the finished item getting taxed, not the consumer.) I'm not usually one to promote trickle-down economics, but I think that in this specific case, it's true.

ohh European still pay income tax that explains it, I was under the impression that VAT was basically the only tax people paid over there. Well.. ok.. there are some benefits to living in the U.S. then..

But isn't this still totally unfair to the consumer because rich businessman end up paying not much more VAT than lower income consumers?

Also, VAT was originally only supposed to be charged on luxuries, not essentials, so those with luxurious lifestyles paid proportionately more. This attitude has been slightly eroded over the years, though, and there have always been the inevitable dubious calls on that rather fractal boundary.

Peter