A related type of tax is the value-added tax or VAT. It is a system in which all businesses remit taxes on their sales but they are also refunded the amount of VAT remitted by their suppliers. In addition to avoiding cascading, under VAT there is no need for government to determine which sales are taxable and which are not, since all sales--retail, wholesale and intermediate--are taxed.
Some or all of these taxes may be refunded but it generates a lot of paperwork (and income). The VAT paperwork can be burdensome but it remains a major source of tax income for most of the European Union, Mexico and other countries which charge on average a 15-25% VAT rate. Canadian sales taxes range from 5% in Alberta to an effective 16.6% in Prince Edward Island where sales tax is also applied to the federal Goods and Services Tax.
