value-added tax

/ˌˈvælju ˌˈædəd ˌˈtæks/

Other forms: value-added taxes

A financial charge on goods that's paid to the government at each stage of production is known as a value-added tax.

In economics, a value-added tax, also known as a VAT, is a relatively small amount that's charged along the chain of producing and distributing goods. For example, instead of a simple tax on the pie you purchase at the supermarket, a value-added tax is paid by the baker who buys wheat and apples from farmers, by the store that buys pies from the baker, and finally by you when you pay for your apple pie.

Definitions of value-added tax

1. noun

   a tax levied on the difference between a commodity's price before taxes and its cost of production
   synonyms: VAT, ad valorem tax

   type of:

   excise, excise tax

   a tax that is measured by the amount of business done (not on property or income from real estate)