Introduction - The Harmonization of Turnover Taxes - Main Reasons for Harmonizing Turnover Taxes Throughout the EU
3 important questions on Introduction - The Harmonization of Turnover Taxes - Main Reasons for Harmonizing Turnover Taxes Throughout the EU
What is a cascading turnover tax system?
- A system where tax is applied at each stage of the production or distribution without allowing businesses to deduct the paid tax.
- Tax on tax
Disadvantages of cascading tax systems
- In a cumulative tax system, the tax burden increases with each stage in the supply chain, which encourages businesses to merge and reduce the number of stages.
- Exported goods must be tax-free to keep trade fair. In cumulative tax systems, taxes add up at each stage, making it hard to calculate, and estimates are difficult to manage.
Main reasons for Harmonizing EU Turnover Taxes to VAT
- Cascading systems/different tax systems between countries hinder international trade
- It causes vertical integration of enterprises
- Different tax systems cause barriers to the free circulation of goods
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