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A common trend by many governments has been to introduce a Value Added Tax to replace a Sales Tax (as evidenced by the multitude of HST related questions on this site). How do these types of taxes differ? Are they better for business? Does the government get more or less from each system? Is one system worse for the consumer?

Zephyr
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Sales taxes are charged at the point of purchase, while a VAT is assessed during the production process of the item. In the end, the amount paid by the consumer is the same, but with the VAT, the tax was collected from the manufacturer, instead of the consumer.

One of the big arguments for VAT is that it prevents lost revenue due to things like smuggling (if sales tax increases past 10% smuggling spikes, so the VAT is a good mechanism if you're looking to implement large taxes on goods). It also keeps the tax burden away from shippers and other tiers of the production process that don't change the intrinsic value of the item.

Satanicpuppy
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