Value-added tax

Definition:

A value added tax (VAT) is a form of consumption tax. As a buyer, it is a tax on the purchase price. As a seller, it is a tax on the "value added" to a product, material or service at his/her stage of its manufacture or distribution. For example, if a television is built by a company in a country that charges VAT, the manufacturer is charged VAT on all of the parts they purchase to produce the television. Once the television is sold, the consumer pays VAT on the entire product. The VAT is ultimately passed on to the end user.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Contingency order

In the context of general equities, order to buy one security, if the trader can sell another, usually given that certain price limits or conditions reach a certain level. Swap, switch order.

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