Why not 100%? How is that even supposed to work in low-margin markets like construction, where the profit is 100x less than the costs, so even 1% tax would erase it? But any markets really, this makes innovation and business so risky that I'd probably close down my IT company too.
Markets will adjust, sure. It will be priced in, but that's the problem. They will become less efficient, quality will be worse, everything will be slower, more risk averse, and thus more expensive to the customer - that is necessary to survive in this new environment. That also means that people's income gets lower and grows slower.
It'd be risky because I have no idea if I'm actually going to make money or not. European states set very draconian rules like 1% daily interest on unpaid taxes - no way I'm taking this shit on.
Two factors are responsible for the bulk ens*ttification of the markets: any barriers to competition and information asymmetry between purchaser and seller. Taxation is not a factor unless it's done with too much micromanagement that incentivises doing weird things to your product/service to avoid higher tax.
VAT is already a purchase tax, just collected from the end consumer. You could just raise VAT and do away with income tax. But since the burden is on the end consumer only (not along the chain, because of 100% deductions) it would have to be raised very high. And VAT is with us long enough that many ways to exploit its edge cases were discovered. General purchase tax collected at all steps of production chain could spread the tax burden away from final consumer to the people who exploit them (aka businessmen) thus fulfilling the role that income tax currently fulfills. It would also have way less edge cases and could replace things like import tariffs and social security fees, excise taxes and many more.
> It'd be risky because I have no idea if I'm actually going to make money or not.
That's the inherent risk of business. You have to decide if it's worth it regardless of whether a server costs you $x or $x+10% purchase tax.
> European states set very draconian rules like 1% daily interest on unpaid taxes - no way I'm taking this shit on.
You would never have unpaid taxes because they'd be automatically collected by the bank at the moment of purchase. If you don't have money to pay for purchase tax you don't have money to make a purchase.
> Just do the same thing but with VAT...
We could do some of that if we reduced VAT deductions from 100%. But it would be worse because VAT is very limited and thus has a lot of edge cases where it comes in contact in systems outside it's domain. Those can be used to get away from paying by doing superfluous operations.
