Value Added Tax (VAT) is the form of consumption tax, or indirect tax, most often used in the European Union. VAT is a consumption tax that – like sales tax - is borne ultimately by the final consumer, but it is collected fractionally. VAT is assessed on the value added to goods and services at each stage of production until final sale. This means that VAT is collected at each stage of the production of the product/service, but becomes neutral for the VAT registered businesses, since they can deduct the VAT paid on purchases for their business activities from the VAT they have collected. The amount of VAT charged minus the VAT paid is then paid to the revenue authorities.