Value-Added Tax

A consumption tax known as a value-added tax (VAT) is imposed on the value contributed throughout each stage of the production of a product or service.

Each business in the production chain is required to pay VAT on the value of the generated good/service at that level, with earlier VAT paid for that good/service being deducted at each stage.

The final consumer, on the other hand, pays VAT without being able to deduct previously paid VAT, resulting in a tax on final consumption. This technique prevents tax pyramiding by ensuring that only final purchases can be taxed under a VAT.

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