VAT is the acronym for "value added tax." You need to understand what this is, because it's coming our way. As we become more and more "Europeanized," we will have to turn more and more to European-style government financing methods and this one tops the list (the French government gets about half of its revenue from that country's VATs).
In a VAT, every time value is added to a good (or service) it is taxed. For example, when ore is mined from the ground and then smelted to produce iron, a VAT would be added. When a steel company takes the iron and turns it into a steel beam, a VAT would be added. When a construction company takes the beam and welds and cuts it to fit into a steel building, a VAT would be added. And when the erecting company takes the parts of that building and puts it up on someone's land, another VAT would be levied.
Businesses, of course, recoup the VAT by charging the consumer higher prices (but "businesses" don't pay taxes anyway--consumers always do).
You can see how the amount of the VAT can add up quickly--and how consumers, after the initial shock of price increases--get adjusted to it (it becomes invisible--you don't see that "Sales Tax" line on your receipt and you don't see the number on your paycheck or tax return). This is why governments like it so much--nobody sees it, people forget about it, and it can be raised with minimal fuss and outcry.
This isn't the sexiest of subjects--but it's important. I'll be blogging about it more soon, but I don't want to cause the eyes of too many readers to glaze over so I'm going to keep these short and sweet. :)