Quote:
Originally Posted by Kilarney
Correct me if I'm wrong, but isn't the VAT added at levels other than retail? (ie: when the wholesaler sends to to the retailer, etc.)
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VAT is added at every level, but a business can reclaim the VAT on things it buys for the business.
Eg, suppose VAT is 20% and you spend £1000 on "widgets" for your business, your supplier would charge you £1200, but you could reclaim the £200 in VAT.
Now, if you resold those widget for £2000, you would have to charge the person you sold them to £2400, and you'd pay the £400 VAT to the government.
That's why it's called a value
added tax, because you only pay tax on the value that you "add" to the product - the different between the price you pay for it and the price you sell it for.