It's the same here with VAT...
And now it's 23% of the sale price!!!
For example if you are a consultant every receipt you fill you have to charge your client with 23% VAT!!!
Even here (PA-USA), as a consultant, 100% of what is "sold" is considered a value addition and therefore would be taxable under VAT.
Since we have no VAT, and since the information/expertise that I am selling will be part of a larger "production process" it is not taxed. Only the last link in the chain is taxed.
If I sell equipment, I do not pay tax on the components I buy to install in the equipment (not the last link yet), but if I sell to the end user I must charge tax on the entire price.
If I sell the same equipment to a reseller...or if I sell it to a company that will use it to manufacture something else...it is not taxable. If I sell it to a person who simply wants to have it but will not use it to make something else, it is taxable since it is the last link in the chain.
It seems like two equivalent ways to accomplish the same thing.
VAT taxes each party according to the value they themselves added...
whereas our taxes defer the tax collection to the end and collect it all at once.
The major difference I see between the two systems is that it is easier to dodge the taxes (illegally) in the latter method.