VAT (Value Added Tax)

Value Added Tax (VAT) is a consumption tax applied to the sale of goods and services. It is charged at each stage of production and distribution based on the value added at that stage. For example, if a manufacturer produces a chair and sells it to a retailer, VAT is added to the sale price. The retailer then collects VAT when selling to the customer, but can deduct the VAT paid to the manufacturer. This system helps governments raise revenue while allowing businesses to reclaim the tax they’ve already paid, promoting economic activity and fairness in taxation.