ABSTRACT
Value added tax (VAT) is an indirect tax, first applied in France in 1954 and subsequently introduced in the EUROPEAN COMMUNITY (EC) (1967-73) according to the 'origin' principle. It is applied on value added at each stage of exchange of goods and services, proportional to the extra value added to the product or service at that stage, thus avoiding the 'cascade effect'. It facilitates the removal of external tariffs in CUSTOMS UNIONS (CUS), FREE TRADE AREAS (FTAS) or COMMON MARKETS. VAT is increasingingly popular because of its potential higher revenue yields and its effect of controlling the black economy.
