The Illusion of Simple VAT: Why Copying Europe's Tax System Won't Work

Kazakhstan and the European VAT Model: A Comparative Analysis Introduction: Recently, a video by Zhanar Suleimenova went viral, discussing the complexities of the Value Added Tax (VAT) system, using the United Kingdom as a prime example. The video highlights the differences between the perceived simplicity of a single high VAT rate and the reality of a multi-tiered system with exemptions. This raises questions about the suitability of directly copying European tax models without understanding their underlying principles. The UK VAT System: Suleimenova's video details the UK's three VAT rates: a standard rate of 20%, a reduced rate of 5%, and a zero rate of 0%. The 0% rate applies to essential goods and services, such as food, children's clothing, and education. This is crucial, as it demonstrates that high overall rates don't necessarily translate to high taxation on essential items. Small Business Considerations: The video also sheds light on the "Flat Rate VAT" scheme, designed to simplify tax calculations for small businesses. This scheme allows businesses to pay a fixed percentage of their turnover, rather than calculating input and output VAT, which can be complex for smaller operations. However, Suleimenova points out that under this scheme, businesses cannot claim VAT back on their own purchases. The Broader Point: "The essence of the European tax system lies in its flexibility, targeted approach, and social logic," Suleimenova states in her video. She argues that simply copying the numerical VAT rate of a European country without considering these underlying principles is a mistake. The UK system, with its multiple rates and exemptions, reflects a social policy that aims to protect vulnerable groups and essential services from excessive taxation. Conclusion: Suleimenova's video serves as a valuable reminder that tax systems are not just about numbers; they are about social policy and economic goals. Directly copying a system without understanding its underlying principles and social context can be counterproductive. Kazakhstan, if it wishes to emulate European models, must consider the broader picture.