How is the VAT different from a national sales tax?
VAT is assessed on the value added at each stage in the production and marketing process. The manufacturer pays VAT on the raw materials and collects VAT on the finished goods, taking a credit for the VAT already paid. The wholesaler(s) also do the same, paying VAT on their purchases and collecting it from their customers with a credit for the VAT already paid. The retailer does the same, paying VAT on their goods for sale and collecting it from their customers, again taking a credit for the VAT that they paid. Sales taxes are collected only from the final retail consumer. Raw materials and goods purchased for resale are purchased tax-free until the final retail sale where the retail consumer pays the tax. The end result is the same. The retail consumer pays the tax. The only real difference is that VAT is much more labor intensive as every step in the manufacturing and wholesaling process requires the collection and payment of VAT along with the requisite filing of VAT returns with th
