I disagree that whether or not the cost of labor is deducted has anything to do with whether a tax is a VAT.
A VAT is literally a “value-added tax.” What it seeks to tax is the “value added” at each step of the process of bringing an item to market.
This, of course, not only adds a tax at every step of the way, it opens the process to political corruption because someone, out-of-sight, of course, gets to define what is “value” at every step of the process and then define when “value” is “added” and then define how to measure how much “value” was “added.”
It really doesn’t have anything to do with the cost of labor.
Further, I think those who claim the NRST is a VAT are not thinking at the level of sophistication you are anyway. They just see a tax on consumer goods and think “VAT.”
Well, I disagree that there is any subjectivity or difficulty in determining “value-added”.
A business simply charges it’s customers a percentage of the price of the product it sells, and subtracts the VAT taxes it has paid in making the product (which are just a percentage of the cost of the goods it purchased to make the product). The difference is remitted to the government.