This is something I wrote on PJ Media in 2012 about VAT:
So how does it work? My company imports goods from the U.S. Most of what we import was originally made in China (of course), but when we buy from the U.S. I have a warm fuzzy feeling that I’m purchasing from reputable companies residing in a jurisdiction that clings to the rule of law. I sleep better at night after wiring $100,000 to a U.S. corporation than after I buy in China.
When the goods arrive at a port, I pay my shipping company three charges. One is for the cost of shipping, one is a fee for performing the customs clearances (a painful experience if you try to do it without help), and the third is a VAT on the invoice value of the shipment. If I ship $100,000 of goods to Israel, I hand over $16,000 to the government at the port to get the goods.
Hopefully, we have pre-sold much of a shipment so within a few days the goods are in the hands of dealers (I sell a little to end users, but mostly I sell to people who sell on). Let’s say I sell the whole shipment to one customer. If I sell on for $130,000, I have to add 16% on top, so I invoice $150,800. I’ve paid $16,000 to the government and now I’m waiting for my customer to pay $130,000 for me, and $20,800 for the government.
And here’s the sticking point: I have to account for the VAT on the day of invoice, which means if I give the customer 60 days to pay, I’m out of pocket by $16,000 for 60 days.
In effect, I’ve lent my money to the government on an interest-free loan. When (or if) my customer pays I will have collected $4,800 for the government -- and I had to do all the administration. It’s even worse if the goods are not pre-sold, because I end up loaning the money to the government until the stocks are sold.
And I'll probably be flagged by Cheetah for copying MY OWN ORIGINAL WORK... but who cares.
This was the conclusion:
The net result, barely mentioned outside of obscure economics texts: businesses give an interest-free loan to the government directly from their working capital and must act as unpaid tax collectors. That is one of the dirty little secrets of what VAT would mean for businesses in the U.S.
Don't fall for VAT America, you don't want it. It is yet another shift to bigger and bigger government.