page_title: Value-added tax
section_title: Trade criticism
hierarchical_section_title: Value-added tax / Criticisms / Trade criticism
caption_attribution_description: English: VAT tax map
context_page_description: A value-added tax, known in some countries as a goods and services tax, is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution or sale to the end consumer. If the ultimate consumer is a business which collects and pays to the government VAT on its products or services, it can reclaim the tax paid. It is similar to and is often compared to a sales tax.
  VAT essentially compensates for the shared service and infrastructure provided in a certain locality by a state and funded by its taxpayers that were used in the provision of that product or service. Not all localities require VAT to be charged, and exports are often exempt. VAT is usually implemented as a destination-based tax, where the tax rate is based on the location of the consumer and applied to the sales price. The terms VAT, GST, and the more general consumption tax are sometimes used interchangeably. VAT raises about a fifth of total tax revenues both worldwide and among the members of the Organisation for Economic Co-operation and Development.
context_section_description: Because exports are generally zero-rated (and VAT refunded or offset against other taxes), this is often where VAT fraud occurs. In Europe, the main source of problems is called carousel fraud.
  This kind of fraud originated in the 1970s in the Benelux countries. Today, VAT fraud is a major problem in the UK. There are also similar fraud possibilities inside a country. To avoid this, in some countries like Sweden, the major owner of a limited company is personally responsible for taxes.
  Under a sales tax system, only businesses selling to the end-user are required to collect tax and bear the accounting cost of collecting the tax. Under VAT, manufacturers and wholesale companies also incur accounting expenses to handle the additional paperwork required for collecting VAT, increasing overhead costs and prices.
  Many politicians and economists in the United States consider value-added taxation on US goods and VAT rebates for goods from other countries to be unfair practice. For example, the American Manufacturing Trade Action Coalition claims that any rebates or special taxes on imported goods should not be allowed by the rules of the World Trade Organisation. AMTAC claims that so-called "border tax disadvantage" is the greatest contributing factor to the $5.8 trillion US current account deficit for the decade of the 2000s, and estimated this disadvantage to US producers and service providers to be $518 billion in 2008 alone. Some US politicians, such as congressman Bill Pascrell, are advocating either changing WTO rules relating to VAT or rebating VAT charged on US exporters by passing the Border Tax Equity Act.  A business tax rebate for exports is also proposed in the 2016 GOP policy paper for tax reform.  The assertion that this "border adjustment" would be compatible with the rules of the WTO is controversial; it was alleged that the proposed tax would favour domestically produced goods as they would be taxed less than imports, to a degree varying across sectors. For example, the wage component of the cost of domestically produced goods would not be taxed.
caption: National VAT act as a tariff on imports and their exports are exempt from VAT (zero-rated).[111]
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