Definition of Value-added Tax (VAT) | Consumption or Excise Tax

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Value-Added Tax (VAT) Definition

Short Definition
Value-added tax (VAT) is a consumption or excise tax that is imposed at each stage of production (as value is added to the product).

Expanded Definition
For decades, US tax reform has recommended restructuring our tax system to include a VAT. Many foreign countries use VAT; sometimes replacing or decreasing the amount of income tax a business would have paid.

Related Article
Value-Added Tax (VAT): The Basics

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