I can assure you that everyone is VERY aware of changes in the VAT rates. For example the shops here have been doing great business on the lines of "avoid the VAT rise on Jan 4th by buying now".
Yes the tax is put on at every stage of manufacturing, but the point is its put on every example of a particular commodity, so there is no competitive advantage/disadvantage. In fact it tends to highlight differences in production.
I don't understand your contention that VAT causes people to stop purchasing and companies will stop manufacturing in the quantities, which therefore means less jobs. I dont mean I dont understand the process, but how is that different from the effects of an income tax? With that, the prices remain the same but I've just got less money to buy with - so doesnt that have exactly the same effect?
How is VAT not a tax that everyone pays? Everytime you buy something, you pay the tax. So everyone who buys something, pays the tax. Therefore everyone pays.
Don't get me wrong, I don't like paying taxes any more than anyone else, and I understand that anytime the government takes money out of the economy they risk damaging it by the process you outline. However, my contention remains. IF there has to be a tax hike, I'd rather it was a VAT increase than an income tax rise.
My concern over the VAT is that it becomes, or can become, hidden from the general public. An income tax is seen by everyone. The general public doesn’t really understand the VAT and governments know this very well. As an example, when you purchase an airconditioner for your home, a Vat tax is hidden in the price. Therefore the public doesn’t know exactly how much of the price is a VAT tax. That concerns me.