VAT is the waiter who never forgets to charge you coffee. It is an indirect tax, which means that We all pay it equally when consuming, regardless of our income. But here comes the curious: the more money you have, the lower the proportion of your income that is going in this tax.
The other day they asked me how this was possible, so I explain it to you. VAT is a consumption tax, which means that it applies to the price of the products and services we buy. In Spain, the general type is 21%, although there are reduced types (10%and 4%) for certain essential goods. By the way, The average type is 15.3%. But there is a key detail: people with lower income allocate a much greater part of their money to consumption, while people with higher income can save or invest a more important part. And as VAT only applies when you consume, those who save end up paying proportionally less. Otherwise, the poor and the rich one will eat a fillet. It is true that the rich will pay a much more expensive steak. But you will not eat 35 fillets. Therefore, both will pay the steak’s VAT, with the difference that this steak It is 10% of their income and rich 0.1%.
To see it with an example. Verónica wins € 1,500 per month and spends almost everything on products and services subject to VAT. Suppose its average monthly expense has a VAT of 10%. Then, I would pay € 150 in VAT, which is equivalent to 10% of your income. María, on the other hand, wins € 10,000 per month, but only spends € 5,000 on consumption. Using the same means of VAT (10%), I would pay € 500 of VAT. But, where appropriate, this represents only 5% of its income. The result is clear: Although Maria pays more in absolute terms, the relative effort is less than that of Veronica.
Source: Carlos Arenas Laorga
A menu of € 15 at a bar has 10% VAT, while a dinner in a luxury restaurant, which costs € 150, also has a 10% VAT. Although absolute spending is greater in the luxury restaurant, The proportion of taxes remains the same. It is like the steak of the beginning.
If we do not want a regressive tax, some things could be done, such as returning VAT to people with lower income than a certain salary, reducing VAT of essential products, or other alternatives.
VAT seems an equal tax for all, but in practice much more affects those who have less. Those who earn more can afford to save or invest, avoiding paying so much for this tax. In the end they pay more, yes. But now the graph is better understood.