Many CEOs Say Value-Added Tax Has Merits

More than 40% of chief executives surveyed nationwide favor introduction of a value-added tax to help reduce the federal deficit, according to a report released Wednesday.

But the report by the Conference Board offered mixed conclusions on whether the enormous revenue potential of a value-added tax, or VAT, outweighs its drawbacks.

A value-added tax is passed along during the stages of production from raw-materials suppliers to manufacturers to wholesalers to retailers to consumers, who bear the final burden of the tax.

At each stage, buyers pay a progressively higher tax to sellers, who recover a portion of the VAT paid during earlier purchases.

The Conference Board report estimated that a VAT could raise between $13 billion and $22 billion annually in the United States for each percentage point of tax levied.

But it said a VAT would not be cost efficient at below 10% and that countries employing the tax have rates between 15% and 25%.

In a survey of 400 chief executives asked recently to evaluate new revenue sources to reduce the deficit, 42% favored a VAT, 35% were opposed and 33% were neutral.

Among concerns cited in the report, though, were the cost and number of employees that would be needed to implement and operate the tax.