Value-added Tax

A value-added tax (VAT or V.A.T.), recognized in some countries as a goods and services tax (GST), is a type of tax that is evaluated incrementally. It is imposed on the price of a product or facility at each stage of manufacture, circulation or sale to the end customer. If the ultimate customer is a business which collects and pays to the government VAT on its products or amenities, it can regain the tax paid. It is similar to and is often linked to a sales tax.

VAT basically recompenses for the shared amenity and substructure provided in a definite area by a state and subsidized by its taxpayers that were used in the endowment of that product or service. Not all localities require VAT to be charged, and exports are often excused. VAT is typically applied as a destination-based tax, where the tax rate is based on the location of the consumer and applied to the sales price. The terms VAT, GST, and the more general depletion tax are sometimes used interchangeably. VAT raises about a fifth of total tax revenues both global and among the members of the Organization for Economic Co-operation and Development (OECD).[1]:14 As of 2018, 166 of the 193 countries with full UN membership employ a VAT, including all OECD members except the United States,[1]:14 where many states use a sales tax system in its place.