[almostnormal]

Huge difference between EU and US: In the EU, the seller always pays VAT to the government. In case of B2B, the buyer can claim it back from the government. As proof, store the invoice and data about the payment (and that the goods/service have been received). Proof is rarely verififed. Huge potential for tax fraud.

With all invoices going through government computers, only VAT that has actually been paid can be claimed back.

The easier solution would of course be to get rid of VAT, and increase income tax instead. But then people earning barely enough will suddenly notice how much the are paying. VAT nicely hides that fact.

[jjcob]

The nice thing about VAT is that everyone has to pay it, whether they pay income tax or not. Lots of people get their money income tax free (undeclared jobs, income from abroad, inheritance, etc). With VAT everyone has to pay.