The United States does not have a Value-Added Tax (VAT), making it the only OECD country without this system. Instead of VAT, the U.S. relies on state and local sales taxes collected at the final point of sale. Consequently, consumers do not pay VAT within the USA, but may pay it when importing goods.
VAT is a tax which is ultimately paid by the consumer, and is not a tax on individual businesses. VAT is typically included on business invoices.
Using invoices, each seller pays VAT on their sales and passes the buyer an invoice that indicates the amount of tax paid excluding deductions (input tax). Buyers who themselves add value and resell the product pay VAT on their own sales (output tax).
U.S. citizens only pay VAT when in Europe or another country with a value-added tax. The U.S. does not operate a VAT system. Instead, it applies sales tax at the final point of sale, which is collected by the seller and remitted to the appropriate state or local authority.
Common examples of VAT-exempt items or services include: Education: Educational services, such as those provided by schools, universities, and vocational training centers, are often VAT-exempt. Healthcare: Medical services, hospital care, and the supply of certain medical products may also be exempt from VAT.
There is no VAT in the British Virgin Islands. There is no VAT in Brunei. The standard VAT rate is 20%. There is no VAT in the Cayman Islands.
The United States does not operate a national VAT system, and therefore the US government does not issue VAT numbers. Instead, businesses must navigate a complex framework of state and local Sales Tax.
Retail sales taxes suffer from several enforcement problems. Most notably, the government has no record of transactions with which to verify retailers' tax payments. In a value-added tax, the chain of crediting creates a natural audit trail, and the seller has more incentive to report the transaction and pay tax.
VAT standard rates vary widely. The highest standard VAT rate is 27% (in Hungary)[2](https://www.globalvatcompliance.com/globalvatnews/world-countries-vat-rates-2020/).
The Value Added Tax (VAT) was devised by a German economist in the 18th Century. This multipoint tax system is not a new one but a part of the sales tax system. The introduction of VAT in India in 1986 as part of the central excise regime can be deemed to have been pioneered by the then Prime Minister VP Singh.
As with sales tax in the U.S., businesses are responsible for collecting and remitting VAT. Because it is an indirect tax, businesses charge customers VAT then remit the tax due to the appropriate tax authority.
VAT (Value Added Tax) and GST (Goods and Services Tax) are fundamentally the same type of consumption tax, levied on goods and services at each stage of the supply chain, but the terms are used in different countries and can have structural differences, with GST often being a unified, simpler system replacing multiple taxes (like VAT, sales tax, excise duty) into one, as seen in India and Canada. Both ensure the final consumer pays the tax, while businesses get credits for tax paid on inputs, but specific implementation, rates, and administration vary by country (e.g., EU uses VAT, India uses GST).
Overseas visitors can still buy items VAT-free in store and have them sent direct to overseas addresses. Claiming VAT refunds on items you can take home in your luggage has also ended.
General. The common case against the vat is that it is regressive, reducing the real consumption of low-income households by a greater percentage than for high-income households.
The only major economy without VAT is the United States. This is because each state in the U.S. has its own sales tax regime, with some cities or counties additionally levying a sales tax, rather than a federal sales tax.
Quick answer: UK income tax rates (20-45% across 3 brackets) appear higher than US federal rates (10-37% across 7 brackets), but many US states add 5-13% state income tax on top. The UK offers a £12,570 personal allowance vs US $14,600 standard deduction (single) or $29,200 (married filing jointly) for 2025.