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system
why do vat-registered businesses in the eu charge vat to each other?
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not doing this would defeat the entire purpose of a vat. the reason for a vat rather than a simple sales tax is that it's harder to evade. having a simple sales tax with the type of rates that vat taxes typically are is unworkable because evasion is too easy. imagine i'm a retailer. i buy products from a wholesaler and sell them to consumers. with a sales tax, if i don't charge the customer sales tax, the customer is happy and i don't care (assuming i don't get caught). and if i keep the sales tax but don't report the sale, i make a lot of money. now, imagine a vat. if i don't charge the customer the vat, i lose money since i paid the vat on the wholesale products. and if i don't report the sale, how do i claim my vat refund?
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