From: Ronald Raygun 
Subject: Re: value added tax
Newsgroups: uk.finance
Date: Fri, 29 Aug 2003 09:44:42 GMT

Tim wrote:

> "Ronald Raygun" wrote
>>  in effect paying to the tax office the VAT rate
>> multiplied by their profit.
> 
> Shouldn't that read "markup", not "profit"?  (profit just being part of
> the markup usually, eg another part of the markup being used to pay wages
> etc).

Indeed.  "Profit" has many meanings, one of them is synonymous
with markup.  I thought profit would be easier for a foreigner to
understand than markup.

> "Ronald Raygun" wrote
>> Only the end customer pays out VAT but cannot reclaim any.
> 
> What if the end customer is a (VAT-registered) business who does *not*
> incorporate the goods into their sales?

This is an anomaly (not uncommon, of course, but still anomalous).
In effect this chain has no end customer as such, so in effect nobody
pays VAT on it (the business does pay it, but then claims it back).
Mind you, it's a bit of an injustice.  Ideally, if the business is the
end-user, it *should* pay VAT on it without being able to reclaim it.
But I guess it would be rather difficult to police such a principle.

Could this be what the OP meant by "investment goods"?