What is Value Added Tax?

Value Added Tax (V.A.T. or VAT) is a consumption tax imposed on the value added to goods and services at each stage of the production and distribution chain. It is an indirect tax, meaning that the tax burden is ultimately borne by the end consumer. Widely adopted by governments around the world, VAT is a significant source of revenue and plays a crucial role in funding public services.
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Value Added Tax is a widely used form of consumption tax that plays a crucial role in generating government revenue and promoting economic efficiency. The calculation of VAT is relatively straightforward, with businesses collecting tax on the value they add at each stage of production and distribution. While VAT has its critics, particularly regarding its potential regressive impact on low-income individuals, its adoption by numerous countries underscores its effectiveness as a revenue-generating mechanism. As the global economy evolves, VAT is likely to remain a key component of taxation systems worldwide.