[diego_sandoval]

> Anytime money changes hands the government gets its vig.

And doesn't that create an artificial pressure for money to change hands fewer times (for example, in the production of a consumer good)?

[exceptione]

No, if we are talking about VAT then companies have to make the following sum

  €800 VAT the company charged to clients
  €500 VAT the company paid to suppliers 
  ===== -
  €300 VAT the company has to pay to authorities

This system makes sure that VAT over any good will only be charged once. VAT usually rolls over from one company to the next till it reaches its destination, the consumer.

ULTIMATELY, the consumer pays the VAT. The consumer cannot deduct VAT.

[UncleEntity]

I doubt anyone makes this mental calculation when they’re considering buying something at a store.

Sure, big ticket items people might shop around for a lower tax but will they not buy something based on minimizing the amount they pay to the government?