It deters
consumption but also production in any business that is not
vertically integrated.


Dave wrote:
That distinction doesn't make sense to me. A vertically integrated business
presumably adds more value between raw material and finished product
compared to a business that buys and assembles components produced by
others.

That is true but the profits are proportionally higher (one
assumes, economies of scale and all that) and AFAIK the VAT
is a flat tax... no marginal rate increase for increased
production, and the amount paid out is under cntrol of the
company...

... So the integrated manufacturer itself pays the VAT directly, whereas
if it were assembling components bought from others it would be paying
indirectly via the higher price of the components. I don't see any inherent
VAT advantage for the integrated producer.

Well, go talk to some people who run businesses in Europe. I
have, including an uncle who has done rather well at it.

DSK