Value Added Tax or VAT is a tax when companies buy and sell products. A better name would be PAT, Price Added Tax. A fixed percentage of the price has to be added to this price and paid to the government. When the product becomes more expensive when it’s sold again, the entrepreneur has to pay that percentage in taxes to the government. The rest of the amount he pays through his supplier. The whole process is controlled with invoices and VAT numbers.
In essence VAT is based on the economic production chain, the sale of a product from the cradle to the grave, from raw material to consumer. In the end the consumer pays the tax on the value of the product, or rather the price of the product. In colourcash you’re dealing with a cycle of companies that construct and destruct the product together. So, what’s the deal in this cycle?
You could introduce a similar tax on the colour Red. Nice and pretty. As long as the product grows, it gets taxed, but how to deal with it in the second part of the cycle, that remains the question.
Say you have a product that can be reused after use, before it has to be destroyed forever. You could divide the tax over a number of users. You use the same principle as VAT does, but the other way round. One consumer sells it at a lower Red value; the difference is what he used up. He can charge a bit of VAT for this, and this will compensate for the part of the value on which he paid taxes but didn’t use. Whether it makes sense to levy taxes like this in the colourcash system remains to be seen.