A tax on the amount by which the value of an article has been increased at each stage of its production or distribution.
• VAT completely avoids tax cascading as only charges tax on the Value Added.
• For the Government, VAT is a veritable source of revenue, its broad base can generate more revenue for the government; and secondly, its ease of collection (little or no cost) makes it more economical.
• VAT serves as a fiscal policy instrument available to the government and can increase or reduce VAT rate to redistribute income and check the consumption of harmful commodities such as cigarettes and alcohol.
• VAT does not discourage production, or work since it is not a tax on income or profit, taxes on profits might actually discourage investments..
• VAT helps developing economies to be fully integrated in the international economy.