Should the input VAT exceed the output VAT at a certain point, then the producer gets a VAT ‘refund’ in form of a tax credit.  In practical terms, this entire system becomes self-regulating as producers will want to supply their goods and services only to VAT-registered companies in a bid to reduce on their tax liability.  From the above example, it is important to note that VAT only makes sense if there is ‘value added’ to a product or service along the value chain.