Value-added tax

A consumption tax collected at successive stages of production and distribution. Businesses generally subtract tax paid on inputs from tax charged on sales, leaving final consumers to bear the cost.

Input tax credit: A deduction allowing a business to offset tax paid on purchases against tax due on sales. It prevents VAT from accumulating on business inputs as goods move through production.
Retail sales tax: A consumption tax imposed on sales to final consumers, typically collected by retailers. Unlike VAT, it concentrates collection at the retail stage rather than across the supply chain.
European Union value-added tax: The harmonized framework governing VAT systems in European Union member states. EU rules coordinate national VAT systems while leaving some rates and administration to member states.
Wilhelm von Siemens: A German industrialist who proposed a tax on net sales in 1918 as an alternative to cascading turnover taxes. His proposal anticipated the credit-based structure later associated with VAT.
Regressive tax: A tax that takes a larger share of income from lower-income people than from higher-income people. Households with lower incomes often spend a greater share of income on consumption subject to VAT.
Tax invoice: A document recording a taxable sale, its price, and the tax charged. Invoices substantiate both a seller’s VAT liability and a buyer’s credit claim.
Turnover tax: A tax on gross business receipts that generally offers no credit for tax paid on inputs. Without input credits, turnover taxes can cascade through successive transactions.
Value-added tax in the United Kingdom: The United Kingdom’s national VAT system, including its rates, exemptions, and registration rules. It shows how a country applies VAT through specific domestic legislation.
Maurice Lauré: A French tax official who developed and introduced France’s value-added tax in 1954. Lauré’s reform established the first modern VAT system.
Tax rebate: A repayment or reduction of tax granted under specified eligibility rules. Rebates can compensate households for VAT’s disproportionate burden on low incomes.

Linked from 16 pages