Value Added Tax

Value Added Tax (VAT) is a type of indirect tax applied to the increase in value of a product at each stage of its production and distribution. Businesses charge VAT on sales to consumers but can reclaim VAT paid on their purchases. This ensures that tax is only paid on the value added at each level, rather than the full sale price. Ultimately, consumers bear the cost of VAT, which is typically included in the price of goods and services. VAT is a significant revenue source for governments worldwide.