They're not as far as the amount paid, but VAT introduces taxation overhead to supply chains. Let's say company A makes a pencil in-house, and company B source

They're not as far as the amount paid, but VAT introduces taxation overhead to supply chains. Let's say company A makes a pencil in-house, and company B sources all the materials from 100 subcontractors. Company B will inevitably incur more overhead because it and its suppliers need to deal with the accounting of 100 taxable events, company A only needs to deal with one. Thus those 100 companies forming B will inevitably merge into one to compete with A and fire their state-imposed army of accountants.