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What amazes me is that they try to sell the worst possible marriage of an income tax and a VAT as "reform".

What's worse, the APT is little more than the French turnover taxes, that resulted in the adoption of the VAT to reduce the dislocations and severe burden on business activity caused by their pre-WWII APT style tax system.

Used google to investigate the history of turnover taxes and how they relate to the European VAT.

Google Search: Turnover tax & VATs

The payment transaction tax is hardly new, just a warmed over version, with high tech flourishes and the serial numbers filed off, of the old European turnover taxes. The APT just taxes the same thing more times to drop the per turnover tax rate.

A little Information about taxes on the gross value of transactions, (i.e. turnover tax) and why Europe gave them up in favor of the other problematic tax, the VAT:

Public Finance
Government Revenues and Expenditures in the United States Economy
http://garnet.acns.fsu.edu/~holcombe/

CHAPTER 12
Taxes on Economic Transactions
http://garnet.acns.fsu.edu/~holcombe/chap12.PDF

Page 235-236

Turnover Taxes:

A turnover tax is like a sales tax in that it is a tax paid as a fixed percentage of the value of a transaction, but a turnover tax taxes all transactions, not just retail sales. For example, if a leather tanner sells leather to a shoe manufacturer who then sells the finished shoe to a shoe store for retail sale, a sales tax will place a tax only on the retail transaction, whereas a turnover tax wilt tax every transaction. With a turnover tax, the tax is placed on the leather sold to the shoe manufacturer, on the shoe when it is sold to the retailer, and then on the retail transaction when the final user buys the shoe. The turnover tax is inefficient because it places a tax on the value of each transaction, thus discouraging transactions. The turnover tax taxes each good multiple times. In the shoe example, the retail price of the shoe includes the turnover tax paid by the leather tanner, the shoe manufacturer, and the retailer. Firms can avoid the multiple tax by merging and producing inputs themselves rather than buying them on the market. For example, the shoe manufacturer can buy the leather tannery and the shoe store, so that one firm tans the leather, makes the shoes, and sells them to the retail customer. This means that the turnover tax is paid only once rather than multiple times. A turnover tax encourages vertical integration of firms. When firms that buy and sell to one another merge, they eliminate some market transactions that would be subject to the turnover tax.

The turnover tax, while not common today, was used in Europe before the establishment of the Common Market, which was the precursor to today’s European Community. The replacement of turnover taxes by other types of taxes is a good example of how economic theory can be applied to improve the efficiency of the economy. The turnover tax is an inefficient method for raising revenue because it discourages potentially profitable exchanges and encourages potentially inefficient mergers. Turnover taxes, and other types of taxes, have been replaced in the European Community by the value added tax.

abit more:

http://www.britannica.com/eb/print?tocId=9108616&fullArticle=true

Multistage sales taxes, which are imposed at more than one level of production and distribution, without relief for taxes paid at previous stages, are sometimes called turnover taxes. For reasons of administration and simplicity such taxes are based on gross receipts; consequently, the taxable value at each stage includes amounts taxed at the previous stage (as well as the taxes already paid at previous stages). In order to avoid such pyramiding of taxes, an increasing number of governments employ a value-added tax. This is a modified sales tax based on the net value added at each stage rather than on gross receipts. Roughly speaking, an enterprise's net value added within a given period is equal to output minus input, calculated as its total sales minus expenditure on goods and services purchased from other enterprises. Tax liability is not, however, calculated by applying the tax rate to the value added figured in this way. Instead, receipts are used to show the amount of tax at each step; each seller adds the tax to the price and acknowledges this on his bill. Each enterprise's net tax liability is then calculated as the sum of all taxes it collects on goods it sells minus the sum of all the taxes it has paid on goods it has brought. This is sometimes known as the “invoice” or “credit” method of implementing a value-added tax.

A little history on the turnover tax:

John Quiggin - News Articles - GST9806
Australian Financial Review
4 June 1998

The VAT was introduced in France in 1954, to replace a system which relied a highly distortionary turnover tax on sales to supplement a rather ineffectual income tax system. The problem with a turnover tax is the 'cascade' effect arising from the fact that goods are taxed every time they change hands. The effective rate of tax on a good therefore depends on the length of the marketing chain from producer to final consumer. At even modest rates, cascade taxes are highly distorting. The VAT solves this problem elegantly, by allowing firms to credit the tax already paid on their inputs against the tax imposed on their sales. The net tax payable is therefore a fixed proportion of value-added.

Like the metric system, the VAT was adopted by other European countries, and the use of a VAT was made a condition of membership of the European Union. Once again, the English-speaking countries had less need to make the change, and were slower to do so. Their income tax systems were more effective, and their wholesale and retail sales taxes were less distorting than cascade taxes.

More on the ubiquitous transaction tax (i.e. turnover tax; aka general sales tax)

http://old.ucipr.kiev.ua/english/ers/35/3507.html

Problems of and Prospects for Alternative Sales Tax in the Ukrainian Taxation System

By Valentyn Tregobchuk, doctor of economics, professor, head of the department for resource potential at the Economy Institute of the National Academy of Ukraine;

*** SNIP ***

From the theoretical viewpoint, the sales tax and the VAT are analogous, since they both are indirect taxes on consumption and represent different forms of the same tax collected at each stage of commodity production and turnover. The only difference between those taxes is tax article, to which tax rate is applied. In other words, the sales tax is levied on gross turnover and the VAT on net one. Though, in the practice of application of sales tax the above difference engenders numerous negative consequences the economic theory has not dealt with since early 20^th century, when their major drawbacks related to the nature of tax article became evident.

As the sales tax is levied on the whole sales value, inclusive of raw materials cost, should this tax be applied in the event of several production and turnover stages, it will generate a cumulative effect or that of sequential growth of tax burden. Proceeding from the above, tax burden depends on the “distance” from the manufacturer to the consumer. The higher is value, including wages and profit, added by a company operating at the initial production stage, the stronger is the cumulative effect. Hence, in this respect, the nature of tax burden is uneven and sporadic, for it depends not on the company’s performance but on its role in production chain and the number of technological cycles. Such an approach to taxation stimulates considerable increase of tax burden, first and foremost, that on consumer goods and food enterprises, processing branches of the agro-industrial complex, wood-processing, pulp and paper industries, machine building etc. It turns out that within the same branch, enterprises manufacturing products using high-grade and more expensive raw materials experience much more difficulties.

Such a situation engenders incentives to vertical integration, i.e. consolidation of technologically related enterprises, determining higher level of economy’s monopolization. Monopolies that emerged to optimize tax payments are not interested in cooperation with any intermediate parties, small and medium enterprises offer no incentives to competition. So, small and medium business declines, as companies cannot stand price competition with monopolies.

After the World War II, in the majority of states, the sales tax was not imposed due to the above reasons. However, further growth of fiscal needs urged a number of countries to seek for alternative types of indirect taxation. In 1954, France substituted the sales tax for the VAT and pioneered in change of consumer tax structure.