Problem: TRW is a retailer based in T-land where the currency is the T$. RET sells products to consumers in T-land which it has purchased from the manufacturer, MNN, also based in T-land. T-land's government operates a sales tax scheme with a 10% tax rate which applies to all of TRW's and MNN's products. Excluding VAT, TRW's sales are T$800,000 and purchases from MNN are T$500,000. TRW's output tax amounts to T$80,000. Which of the following correctly describes the resulting tax? Solution
A. Under the current sales tax scheme, TRW can claim T$80,000 from T-Land's tax authorities.
B. Under the current sales tax scheme, TRW's customers pay T$800,000 to TRW.
C. If the government switched to a cascade tax system, TRW would pay T$80,000 in tax.
D. If the government switched to a cascade tax system, tax receipts would reduce.