Value Add Tax needed for Banking Products

All illegal businesses have one thing in common – they don’t pay tax when they sell their products. The only way to bring the Mafia bosses to jail was to accuse them of tax fraud, because they had no good explanation where all their money was coming from. Obviously the banksters have learned from this experience. Togehter with their fellow lawyers and lobbyists they have created all kinds of legal paths to illegal wealth and can play lots of tricks to avoid income tax. Income tax is probably the easiest tax to cheat government and the honest citizens. It is much more complicated to play around with Value Add Tax (VAT) because its based on transaction value and not on profit.  Assume banks had to pay a modest VAT of 1% on all products they sell  and foreign banks had to pay 1 % VAT on all banking products they ship into the country – such a tax was already proposed by John Maynard Keynesto prevent marginal baning transactions. The processing of the tax would immediately create a record of all financial transactions (why should banks treated different than WalMart or MacDonald’s?). Most phony transactions would no longer be valid, because VAT would be due immediately. The VAT on banking products would be also a simple way to recover the money the governments (the citizens – you and me) are throwing at the financial markets. Certainly some banks would outsource their risky business to VAT free countries. However no customer nor any other bank should assume that the US government will cover any of that risk associated with this illegal business.  Certainly a VAT on banking products would make thes products more expensive (so does the VAT on Whoppers for MacDonald’s) but the cost would be taken by the people using banking products and not by the public.