What you are describing is not the core of VAT. It's auxilary scheme for supporting export. And it's a hole in VAT which enables various fraud. Without that l

What you are describing is not the core of VAT. It's auxilary scheme for supporting export. And it's a hole in VAT which enables various fraud. Without that loophole you should rais the prices for your foreign customers by x% but that could make you globally uncompetitive, hence the loophole. VAT is not a tax on customer, it's a tax on added value that every (profiting) company along the production chain creates. Ultimately customer pays it, because the customer pays for everything, both value added and all the costs from previous steps. But it doesn't mean it's a tax on consumer. Because in absence of it companies could just keep their prices as high as they are (because why lower them if the customer already pays them) while keeping all that money.