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I think it is the infact reverse of that interpretation.
You tax the next person for the value you have added to raw products.
A builder pays VAT on lumber (sp? apologies if I've got the spinal lumbar rather than the woody one) because the timber merchants turned trees into wood. The timber merchant added value therefore passes that on to the builder.
The builder turns the timber into an A-frame house, thus adding value. He then charges the housebuyer VAT as part of the purchase price because he added value. He can offset the VAT he collects (output VAT) against the VAT he paid (input VAT).
The end user is the one who foots the VAT bill because he/she doesn't add any value.
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