The spread of Value Added Tax (VAT,1 also called Goods and Services Tax – GST) has been the most important development in taxation over the last half century. Limited to less than ten countries in the late 1960s, it has now been implemented by more than 150 countries (Annex B). VAT now raises 20 per cent of the world’s tax revenue and affects about 4 billion people (Keen and Lockwood, 2007). The recognised capacity of VAT to raise revenue in a neutral and transparent manner has drawn all OECD member countries to adopt this broad-based consumption tax, except the United States, which continues to employ retail sales taxes at the state level (and below) rather than apply a federal consumption tax (see Chapter 1). Its neutrality principle towards international trade has also made it the preferred alternative to customs duties in the context of trade liberalisation.