What is a value-added tax (VAT)?
A) It is essentially a tax on profits earned by firms from the sale of goods and services.
B) It is a tax placed on a product whenever value is added at a stage of production and at final sale.
C) It is a tax imposed on those who supply factors of production, such as the payroll tax.
D) It is a tax imposed on luxury goods to generate additional revenue for the government.

Question

Quizplus · Accepted Answer

A value-added tax (VAT) is a tax placed on a product whenever value is added at a stage of production and at final sale. This means that the tax is applied at each stage of production where value is added, and by the time the product is sold to the final consumer, the tax has been accumulated through each stage. This type of tax is common in many countries around the world, and it is often used as a way to generate revenue for the government.

What Is a Value-Added Tax (VAT)