Not quite. As Wikipedia puts it, VAT is collected incrementally, based on the surplus value, added to the price on the work at each stage of production.
That is the actual tax incidence. That the tax payment is channeled via the last link in chain is just a technicality relevant for the most efficient implementation of this incremental scheme.
The one that pays the actual tax is the one getting the last (most valued) item, i.e. the final user (consumer).
The way it is collected (incrementally) is not connected to WHO pays WHAT.
If an user pays 122 € (100+22 €) that is the total tax (and is payed integrally by the user).
The government gets in total 22 € (integrally paid by the customer at the end) but it receives that amount in (say) 3 steps by differnt actors:
1 - 10% of 30= 3 The manufacturer buys the raw material, pays the VAT to the supplier that (hypothetically) has no preceding VAT costs and thus must give to the government the whole 3 €
2 - 22% of 80= 17,60-3= 14,60 then he does something with it and resells the product for 80 (i.e. it adds value, reselling it for 80 + VAT to a shop) and has to give to the government the differnece
3- 22% of 100=22-17,60=4,40 the shop sells the item to a consumer and has to give to the government the difference
The government gets 3+14.60+4.40=22 € The final user has paid 22 €
The incremental collection method allows to have the tax largely paid in advance, but the amount at the end comes out of the final user pocket.
The Wikipedia has it very clear:
https://en.wikipedia.org/wiki/Value-added_tax
https://en.wikipedia.org/wiki/Value-added_tax#With_a_value-a...
https://upload.wikimedia.org/wikipedia/commons/2/28/VAT3b22....
Quick example, you are into the business of making - say - lemonade.
Set aside the machinery involved, you buy lemons, water and sugar.
The BOM for 100 glass or lemonade is:
- 100 lemons 15 € + 0.6 € (VAT is 4 % on lemons)
- 25 liters bottled mineral water 10 € + 2.2 € (VAT is 22% on mineral water)
- 0.5 Kg sugar 0.70 € + 0.07 (VAT is 10% on sugar)
So you have spent ( given to the supplier) 15+10+0.70=25.70 € + 0.6+2.2+0.07=2.87 VAT
Then you sell the 100 glasses of lemonade and get at 1 € each 100 € (included VAT).
The rate is 22% so you are actually getting 81.97 € + 18.03 VAT.
Since you already spent 2.87 € VAT when you bought the ingredients, you owe the government 18.03-2.87=15.16 € for VAT.
The whole idea of the VAT (or Value Added Tax) is that it applies to the differential in value.
So you have 81.97 € remaining from which you subtract the 25.70 € you spent for the ingredients, and - say - 10.30 € for other (documented) expenses, electricity, depreciation of machinery, etc., local taxes for the stand, etc.
You remain with a net income of 81.97-25.70-10.30=45.97 for which you own the government income taxes at a marginal rate of (still say) 35% 16.09 €.
Now imagine that your lemon squeezing process is covered by a patent for which you have to pay a firm in Ireland (which is also yours) 0.35 € per produced glass. (to simplify, let's say that this is exempt from VAT).
Now your income is 81.97-25.70-10.30-35.00=10.97, thus you owe the government 35% of that 3.84 €.
Meanwhile in Ireland those 35 € (without expenses) are income taxed at a rate of (say) 10% so you give the Irish government 3.50 €.
Instead of the 16.09 € in taxes, you paid 3.84+3.50=7.84 €.