> “In reality, there is little difference between a VAT and a sales tax as you are able to effectively pass the VAT all the way into the consumer/end user with tax credits for other payments.”
Uh no.
Every business cost including taxes is passed along from business to business (B2B) to the consumer retail endpoint purchase.
A sales tax is borne by the consumer and is not passed further as it is applied to the endpoint of the chain.
B2B VATs are passed along in HIDDEN fashion out of the view of the consumer.
A VAT applied directly to the consumer only is a sales tax but the consumer does not see the HIDDEN B2B VATs. This is why legislatures like VATS because they can pick and choose which node in the B2B network to apply a VAT and the consumer will never know why the price is higher. Higher prices due to VATs will be blamed on the retailer.
VATs are hidden, Sales Taxes are revealed in plain sight.
Example. Let's say Country Widgetland has a VAT tax of 15% modeled after the European VAT tax. Manufacturer WidgetMaker's Product Y is its most popular product and is made up of 2 components that cost WidgetMaker $4 and $6 each + 15% VAT tax for a total cost of $10 plus $1.50 VAT tax. They then sell this product at retail for $20 plus a 15% VAT tax for a total of $23.00 ($20 + $3 VAT) which is the price on the shelf [$23]. However, they get a tax credit for the $1.50 in VAT tax they've already paid, hence the government of WidgetLand only receives $3 in VAT taxes, effectively making it a 15% sale tax to the end consumer. In essence, the consumer/end user paid the entire $3 VAT tax that was ultimately sent to the government.
Now let's take this same scenario but North Carolina who let's pretend has just raised their sales tax to 15% from 7-8%. WidgetMaker buys the two raw products for $4 and $6 for a total of $10 bucks and pays no sales taxes. It then sells the product at retail for $20 and collects a 15% sales tax for a total consumer price of $23, including $3 in total taxes remitted to the state of NC, which is identical to the total amount remitted to WidgetLand.
In both cases it's a sale tax. The fact that US states don't require the price on the shelf to include the tax while the European government does is irrelevant to whether its called a VAT, a sales tax or other.