Value added tax

Value added tax (VAT) is a sales tax levied on the sale of goods and services. In some countries, including Singapore, Australia, New Zealand and Canada, this tax is known as "goods and services tax" or GST. VAT is an indirect tax, in that the tax is collected from someone other than the person who actually bears the cost of the tax.

Related Topics:
Sales tax - Singapore - Australia - New Zealand - Canada - Tax - Goods and services tax - Indirect tax

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VAT was invented by Maurice Lauré, joint director of the French tax authority, the Direction générale des impôts, as taxe sur la valeur ajoutée (TVA in French) in the 1950s.

Related Topics:
Maurice Lauré - 1950s

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Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT on the materials and services that they buy to make further supplies or services directly or indirectly sold to end-users. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling.

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