Re: Fair Tax?
The difference between a VAT and a sales tax is that a VAT is harder to avoid. To take the example of a retailer in the two systems:
VAT - They buy a bunch of goods from their suppliers and have to pay net price + 25% VAT. But this is OK, as they're going to claim that money back. They add their mark-up for their own profit, then the government's 25% VAT - and sell on to customers. Then pay the government their pound of flesh, less what they can claim back from their suppliers.
To cheat the system, they'd sell to the customers at say 10% cheaper than everyone else, pocketing the rest that they were claiming was VAT, but this is barely going to cover them for the fact that they now can't claim back the VAT on their suppliers. Ooops. You still get the issue that very small suppliers can undercut everyone else by not charging VAT, but then they also can't claim it back - so there's a limit to how much they can do.
Assuming our shop operates properly, they're paying no VAT themselves - it's just some extra admin, and a varying effect on their cash-flow.
Sales Tax - In this example of a sales tax, there is only one side to the transaction. Being business-to-business, then our shop goes out and buys their supplies, no sales tax will be payable. Thus they have the ablity to sell to the customers at a discount, and pocket some portion of the sales tax. Obviously big firms can't get away with this, but smaller ones can, and if they can undercut the big boys (who do pay) then that's going to be a route to avoidance there.
Now you might say the answer here is to have the retailer fill out loads of forms for the lovely tax man, so he can track what's going on and catch them at their dirty game. At which point, the simplicity and lack of bureaucracy that is the advantage of a sales tax has just collapsed. Now you've got the same level of paperwork going on, the same admin losses to businesses, the same level of paperwork for the government to tax - but still the easier possibility to avoid tax, as you've not got the incentive of claiming your own VAT back - that keeps (most of) the VAT people more honest.
Also, you've had a big old moan about how bloated European governments are. And sure, governments can always find ways to spend money. But even though people may resent being taxed, they also resent it if you stop spending government money on stuff. That tension is the major issue of politics. But what would you cut? Health? Defence? Unemployment benefits? Pensions? Education? The UK government has averaged just under 40% of GDP in spending in the last 35 years, which means it's going to need to average taxes of about 40% of GDP. I suspect it will be very hard to move it very far from that, and keep the voters onside.
Actually the US is a lot closer to that level of spending/taxing itself now, as federal spending has increased so much since the 50s.