Comment on Do you buy PC games from third party key sites or from Steam?
forestbeasts@pawb.social 1 day ago
all nations have a form of VAT
Is all sales tax VAT though? Or is VAT more of a specific thing?
(we’re American so we’re used to sales tax being randomly added onto everything, and know other countries generally don’t have that because they’re more, uh, civilized places; not super clear on how VAT specifically works though.)
Tiral@lemmy.world 1 day ago
VAT (Value Added Tax) is an indirect consumption tax levied on the value added at each stage of a product’s production and distribution chain. Unlike a traditional sales tax, which is only collected at the final point of sale, VAT is applied at every step, from raw materials to the final consumer.
Businesses act as intermediaries by collecting output VAT from customers and paying input VAT on their own business expenses. To determine their tax liability, businesses deduct the input VAT they have paid from the output VAT they have collected, remitting only the difference to the government. This credit mechanism ensures that the tax burden ultimately falls on the end consumer, who cannot reclaim the VAT paid.
For example, if a manufacturer buys raw materials for $100 plus $10 VAT (input VAT) and sells the finished product for $150 plus $15 VAT (output VAT), they remit $5 to the government ($15 collected - $10 paid). This process repeats at each stage, ensuring the government collects 10% of the value added at that specific step.