ABSTRACT
Scheme D starts by simply apportioning the sales of any tax period according to the cost of purchases during that same period. But since a trader may buy his highly taxed goods during a period of low total sales and his zero-rated goods during a period of exceptionally high total sales (or vice versa) he may stand to pay much too much (or much too little) in tax. These possibilities are avoided under Scheme D by requiring an adjustment once a year under which the year's sales are apportioned according to the year's purchases of the various categories of goods; and a tax surcharge or rebate is made to adjust the tax actually paid during the year to the adjusted year's liability. This works so long as there are no changes of tax rates during the year. If there are any such changes, a special adjustment is made covering less than a year, i.e. covering the period between the last adjustment and the day of the tax change. This may well be an acceptable compromise if tax-rate changes occur infrequently. But if there were frequent changes, the situation would be very different. To take the extreme case, if there were a tax-rate change every tax period, this would be equivalent to having Scheme D without the annual adjustment.
