Chapter Eight Value-Added Tax e Panel developed and analyzed a proposal to adopt a value-added tax (VAT) that would replace a portion of both the individual and corporate income taxes. e VAT is a type of consumption tax that is similar to a retail sales tax but is collected in smaller increments throughout the production process. e “Partial Replacement VAT” proposal studied by the Panel would combine a VAT and a lower-rate version of the Simplified Income Tax Plan described in Chapter Six. As shown in Table 8.1, a VAT imposed at a 15 percent rate would allow the top individual income tax rate in the Simplified Income Tax Plan to be reduced to 15 percent. e top corporate income tax rate would also be lowered to 15 percent. Both the income tax and VAT rates are presented on a tax-inclusive basis, as is the norm for income tax rates and the way they are presented throughout this report. e tax-exclusive rates would be 17.6 percent. A discussion of the difference between tax- exclusive and tax-inclusive rates is provided in Chapter Nine.