What does VAT stand for in taxation?

VAT stands for Value-Added Tax, which is a type of indirect tax that is imposed at each stage of the supply chain where value is added, from production to the point of sale. It is calculated based on the increase in value of a product or service at each stage, rather than on the total sales price. This tax system is designed to prevent tax on tax, ensuring that only the value that is added at each point in the manufacturing and sales process is taxed.

By using a value-added approach, VAT ensures that the ultimate tax burden is borne by the final consumer, while businesses collect and remit the tax during their transactions. This can enhance efficiency in the tax system and reduce the risk of tax evasion since businesses need to keep detailed records to claim credits on the tax they pay on inputs, making enforcement easier for tax authorities.

Other options mentioned, such as Value Addition Tax, Value Alteration Tax, and Variable Assessment Tax, do not accurately capture the nature and application of this tax, making "Value-Added Tax" the correct and widely recognized definition.