Chris

VAT is a harmonised consumption tax that applies across the EU, ostensibly to simplify what can otherwise be quite complex systems of taxes within a manufacturing and sales chain. The EU’s justification for it is that it prevents member states “accidentally” subsidising industry by overestimating tax receipts and overpaying refunds to manufacturers.

The EU doesn’t directly collect VAT (not even a portion of it), but a member state’s VAT receipts are part of the way its contribution to the EU budget is calculated.