value-added tax

value-added tax (VAT)
An indirect tax levied on goods or services as a percentage of their value added. The customer pays VAT on purchases in addition to the normal price; the seller then pays the government VAT collected on sales less the VAT they have paid on purchased inputs. VAT is levied in many countries: it was introduced in the UK in 1973. Goods may bear VAT at different rates. Some goods, for example food in the UK, are exempt, and VAT is not payable by businesses with turnover below some minimum level.