Value Added Tax

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Value Added Tax

Summary of Value Added Tax

A tax imposed upon the value added to a product at each stage of the production process. The tax is applicable to all goods, from primary to consumer products. Each processor in the chain of production pays the tax in the purchase price of the goods, applying the tax paid by prior handlers to its own tax obligation. Only the consumer pays the full tax. The tax is applicable to imported merchandise (usually on top of any duties imposed) but is routinely rebated on goods that are exported.

The VAT is applied by members of the European Economic Community and a few other countries. A modified form of VAT, called the single business tax, is employed in Michigan.

(Main Author: William J. Miller)

Other Popular Tax Definitions in the World Legal Encyclopedia

Value Added Tax (VAT) and International Trade Economy

In relation to international trade economy, Christopher Mark (1993) provided the following definition of Value Added Tax (VAT): An indirect tax, assessed on increments in the value of a product from the raw-material stage through the production process to final sale. At each stage, the tax is levied on the amount by which inputs purchased from the preceding stage have been augmented in value. The final sale price will incorporate all of the V A T payments made along the production chain.

Value added tax and the European Union


See Also

  • National Income
  • National Accounts
  • Expenditure
  • Gross National Income
  • Net National Income


See Also

  • VAT

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