What are Tax Accounting and Types of Value Added Tax?

International tax advisory firm, Tax consulting firms in India and Tax Accounting Services in Singapore



Tax accounting has been a familiar term in the world of business. While it may sound complicated to those who are not economics or accounting savvy, its meaning is very simple. Tax accounting simply stands for a system of accounting methods that are focused on taxes and not the public financial statements. It is governed by the Internal Revenue Code that determines a set of guidelines and rules that companies should follow while finalizing the tax returns. With increasing complexities in the tax departments, there has been a rise in Tax consulting firms in India and Tax Accounting Services in Singapore.

International tax advisory firm is responsible for the task of giving advice related to taxation that benefits the company or smoothens the process of filing and managing taxes. A good tax consultancy firm or a good tax accountant can derive lots of profit for an individual or a company by effectively dealing with taxes. Today there are many value-added taxes in the market that make it even more important to hire tax consulting firms and tax accountants.

The value-added tax, or VAT as its popularly called, can be explained as a charge or a fee that is levied against businesses at different steps of distribution and production processes. It is mostly levied when the product is resold or has additional values attached at it. The VAT is put on the difference between purchasing cost and the selling cost. The cost of value-added tax is applied to the final product by the majority of producers and distributors.

An example of VAT is that, say a pen costs INR 10 and then there is a 2 percent VAT on it, so the purchaser has to give INR 12 for it to the seller. Now the seller keeps the original price of INR 10 and gives INR 2 to the government.  One should be careful and not get confused between value-added tax and the sales tax. While the sales tax is only collected one time, the value-added tax is collected at many points across the production of an item.

There are many arguments in favor and against the system of value-added taxes. The main point in favor of VAT is that since it is collected at different junctions, it becomes harder for people to escape taxation and they are forced to pay it. Besides, since the tax is collected at different junctions so the burden of taxation is eased. The argument against value-added tax says that it makes the tax collection process complicated and unfairly burdens those people who are at a lower ring of production.

The value-added tax is the main source from which tax revenue is derived in several European countries. Members of the Organization for Economic Cooperation and Development, except the United States of America, make use of value-added tax.
 
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