Supply Chain Tax (VAT) is the sales tax that is assessed and collected in every stage of addition to the product or material up till end users (consumers). Individuals cannot claim VAT whilst the business community can recover it. In principle, VAT is applicable to all goods and services other than exempted. VAT is introduced in developed countries in 1980s but it was in phases. Somewhere, it is partial like GST in New Zealand is even simpler and in some countries it is thoroughly brought in like VAT in UK. A general economic view is that VAT involves the widespread of business in all phases like a business man produces an item and he himself will try to engage in storing in bulks then in the supply of the item to the end users as retailers. In this way, companies work as a supply chain and they reduced their costs and raising their margin rates. There is contradiction in the developed economies like EU and mixed economies like Pakistan. The multinationals are monopolists in under developed countries while in developed countries there is competition among them. There, the MNCs reduce their margins and supply quality products in developed areas, in poor economies; they raise their margins and evade taxes. In the second observation, supply and demand suggest that any tax raises the cost of transaction for someone. In raising the cost, either the demand curve shifts leftward, or the supply curve shifts upward. The two are functionally equivalent. Consequently, the quantity of a good purchased decreases, and/or the price for which it is sold increases.

VAT is a regressive tax that is levied on poor income earners of society. There are different systems of VAT in different regions for different goods and services (for example, postal services, medical care, lending, insurance, betting), and certain other goods and services to be exempt from VAT but subject to the ability of an EU member state to opt to charge VAT on those supplies (such as land and certain financial services). There are very high per capita incomes in EU like Germany GDP $3,440bn, PPP $36,100, Spain GDP $1,581bn, PPP $32,120, Italy GDP $2,334bn, PPP $32,210 France GDP $2,734bn, PPP $35,750 and United Kingdom. GDP $2,442bn, PPP $36,820 as compared to developing countries.  In India, VAT replaced sales tax in 2005. Of the 28 Indian states, eight did not introduce VAT. Their GDP 2010 estimates Total $1.367 trillion per capita $1,124 and VAT rate is 12.5%. In New Zealand it was brought in 1986, which is currently 12.5%. It was introduced in Australia in 2000. In Canada Harmonized Sales Tax rate is 13% while his GDP $1,468bn, PPP $40,540. In United States most of the states have a retail tax that is charged to end buyer only its rate is from 0%-13%. Her GDP $14,839bn, PPP $48,400. China GDP $4,818bn, PPP $6,830 whilst there is neither GST nor VAT there is pinyin state tax.

In Pakistan GST is going to be replaced by VAT Ordinance in July, 2010 and this is the only country where student fee is also charged with tax. Government should come forward to stop corruption of 1300bn instead of earning 800bn of VAT that is being received from the same tax payers those are already paying taxes. There is neither a new mechanism to raise tax payer's list nor they reduced corrupt ones. There is very short class of middle level people in our country that is paying these taxes poor are becoming more poor and the soaring prices of commodities are beyond the purchasing power of commons. People are worried how to live with this small income and government is imposing new tax. There is uncertainty in society, blasts are commons, deprived stock exchange, industrial zones are closed, short fall of electricity, changing of business hours in the evening, world is passing through a food crisis last but not least Pakistan has agro-economy that can't afford this burden of VAT. This is one example of VAT suffering country there are many others like india, Brazil, South Africa. So people should comeforward to understand this system of poverty increasing of tax.