[somat]

Now I am curious, Understand that I am from the states, and consequently have zero intuition as to what a VAT is. But... the hard drive importer is directly using the HDDs and as such is not adding any value to the item, why are they paying a value added tax?

If I had to guess it is probably on the value that could have been added to the item.

[ornornor]

It’s just the name for sales tax. Why is there a tax on sales, isn’t a sale a discount? Then is the sales tax negative because it’s the tax on the difference between the full price and the discounted price? You’d probably end up with a refund for buying the thing, unless your state has no sales tax.

[abujazar]

Sales tax is actually very different beacuse it is usually either cumulative and added to each part of the chain, or only the last one; whereas VAT is deducted in all but the last part of the chain.

[abujazar]

Yea, the idea is that the VAT effectively taxes the added value in each step of the value chain because there's a limit to how much you can charge for an item or service. E. g. a 25 % VAT does not necessarily mean the goods become 25 % more expensive; most of those 25 % would have been profit for the reseller, intermediates and manufacturer if it were not for the VAT. Perhaps a little contra-intuitively, a high VAT keeps prices down and business efficient because every intemediate is indirectly taxed even though the VAT is only charged to the final consumer.