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A value added tax, also called a VAT is a consumption tax. As the buyer, it is the tax that is put on the purchase price of the item. As the seller, it is the tax on the "value added" to the product, material, or service, from their own accounting view, by the specific stage located in the manufacture or distribution of the product. The manufacturer had to give the government the difference between the two amount and is able to keep the rest for themselves to help offset the amount of taxes that they had previously paid on the inputs for their production.
Example - on an item with a 10% VAT:
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