Abstract:
Value Added Tax (VAT) is a tax imposed on the value added to a product at each stage of the production and distribution process. Value added is never taxed twice under VAT and thus cascading (tax on tax) effects do not occur. It is a single tax on goods and services but the tax is collected multiple stages. At each of these stages, the amount of tax payable is computed by subtracting the tax previously paid on purchases from the tax charged on sales by the traders for each taxation period. In last three decades, VAT, a relatively new and better commodity taxation, has been introduced in many countries. It has replaced different types of sales taxes in such countries. This article attempts to evaluate VAT by comparing with other sales taxes.
