system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: What’s is the difference between a sales tax and VAT (value added tax)

ELI5: A politician in the UK has just said that he wants to remove the VAT system and replace with a new sales tax. What is the difference between the two and what would be the benefit of scrapping VAT for a sales tax?
gpt
VAT is paid at each stage of production by the people "adding value" to the product.  So you start with a raw material, you make it into something (say a flat sheet of metal), you charge VAT on your part of the job.  The next company who takes \*that\* and turns it into, say, a metal pole does the same for the work \*they\* did to it.

At each stage, you pay VAT on the product you bought, and charge VAT on the product you sold so the only tax you're actually paying is on what \*value\* you added to the product.

A sales tax is, quite literally, just an end-tax on the final product.

This means that sales taxes are paid by the consumer, and the "other" tax along the way is not collected but is "paid" because of the higher prices charged by each person along the way because they can, and limited only by what the consumer spends.

VAT is difficult and expensive to administer and audit, sales tax is easier.  VAT taxes everyone involved with a product along the chain.  Sales tax charges the final customer (which affects demand, no doubt, but that's about it).  VAT is charged on imported goods, etc. too so you can't just make things cheaply in Europe and out-compete local businesses while only paying tax once in the end country, sales tax isn't (though there may be other import duties).

Basically, sales tax is a lazy tax that misses the big picture of employment in the country you're in, local industry, complete taxation of every stage in the process, etc.  VAT is more complex but helps to even the tax burden among all producers along the chain and encourages you to not just produce things cheaply abroad and claim that you added a ton of value to a particular good for performing a simple action (if you get given cheap materials, then do little to them, but charge a fortune to the next guy up the chain for your end result, you have a \*ton\* of VAT collected, almost none given out, and the difference has to go back to the taxman - basically the more you pretend what value you added, the more VAT you have to pay).

Gove is an idiot trying to distract from political finger-pointing in his direction by gaining the support of "big business" who don't want to have to pay or administer VAT, and gain support from "the little man" who just sees a "20%" figure on everything he buys.  Gove knows perfectly well that those people don't care/realise that a sales tax of even a lesser percentage means that the country ends up taking less tax and encourages losing jobs, shipping manufacturing abroad, and cutting corners, in an unregulated environment which favours profiteering and inflating the prices of products.

It's literally a distraction technique because the news for the last two days has been about him doing cocaine.