Value Added Tax (VAT)

A consumption tax collected in stages at each step of production rather than only at the till.

Under a Value Added Tax, every business in a supply chain charges tax on what it sells and reclaims the tax it paid on what it bought, so the government collects a slice at each stage and the final consumer bears the whole amount. It is the dominant consumption tax outside the United States, which instead uses state-level sales taxes. Because each firm has an incentive to document its inputs, it is harder to evade than a single-point sales tax.

The invoice showed the price before Value Added Tax (VAT) and the amount added on top.