VAT stands for “Value-Added Tax” which is a sales tax on the value added to a starting good or service, or a natural state, and is calculated as a percentage of the final price of goods and services paid by an end customer. This is accomplished through a convoluted system in which each individual or firm who adds value to a product is repaid for the tax until the final customer pays it (which can also be a judicial person). In many nations, VAT is one of the most important sources of revenue for the government. Persons who believe in equality of result believe it is unjust to people in worse economic situations because it is a consumption tax that is borne proportionally by everyone who consumes.

The consistency of the tax’s implementation in different countries where it is used is where it gets complicated. VAT is most common in Europe (and consequently the EU), although it is also used in other countries, albeit with a different name in some cases.

For example, in some countries, the value-added tax (VAT) is levied uniformly at the same rate across the board, with rates typically ranging from 15% to 25%. Certain industries or categories of items or services, such as educational services and institutions, books and schoolbooks, basic foods and/or drinks, transportation, and so on, may be exempt from VAT. In other circumstances, it is an industry that is deemed critical for the overall operation of the economy on some, typically arbitrary criteria, such as tourism in countries where it provides a considerable percentage of GDP. In many countries, different VAT rates apply to different types of goods and services. For example, the official VAT rate may be 20%, but the rate of VAT on books may be 5%, while the rate of VAT on travel and accommodation services may be 10%. This is why having a VAT calculator on hand is quite beneficial.