AP 21-1 (Turnover Tax vs. GST) You have been appointed tax policy advisor to a country that has never used sales taxes on goods or services. Because of the increasing need for revenues, the finance minister, Maximus Surplus, is committed to introducing a sales tax. He is considering two alternatives: • A5% value added tax using the same invoice-credit approach that has been incorporated into Canada's GST/HST. • Aturnover tax that is applied as goods move from the raw materials supplier to the manu- facturer to the wholesaler to the distributor to the retailer and finally to the consumer. Minister Surplus would like you to calculate the turnover tax rate that would produce the same amount of revenue as the alternative 5% VAT. In illustrating this to Minister Surplus, he would like you to assume a sale price of $250 plus tax by the raw materials supplier to the manufacturer. At this and subsequent turn- over points, he would like you to assume a markup by each seller in the distribution and

AP 21-1 (Turnover Tax vs. GST) You have been appointed tax policy advisor to a country that has never used sales taxes on goods or services. Because of the increasing need for revenues, the finance minister, Maximus Surplus, is committed to introducing a sales tax. He is considering two alternatives: • A5% value added tax using the same invoice-credit approach that has been incorporated into Canada's GST/HST. • Aturnover tax that is applied as goods move from the raw materials supplier to the manu- facturer to the wholesaler to the distributor to the retailer and finally to the consumer. Minister Surplus would like you to calculate the turnover tax rate that would produce the same amount of revenue as the alternative 5% VAT. In illustrating this to Minister Surplus, he would like you to assume a sale price of $250 plus tax by the raw materials supplier to the manufacturer. At this and subsequent turn- over points, he would like you to assume a markup by each seller in the distribution and

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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