A cascade tax or cascading tax is a

turnover tax A turnover tax is similar to VAT, with the difference that it taxes intermediate and possibly capital goods. It is an indirect tax, typically on an ad valorem basis, applicable to a production process or stage. For example, when manufacturing acti ...

that is applied at every stage in the

supply chain In commerce, a supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products to customers through a distribution system. It refers to the network of organizations, people, acti ...

, without any deduction for the tax paid at earlier stages. Such taxes are distorting in that they create an artificial incentive for

vertical integration In microeconomics, management and international political economy, vertical integration is a term that describes the arrangement in which the supply chain of a company is integrated and owned by that company. Usually each member of the suppl ...

.G.R. Putland,
Critique of the Debits Tax and Turnover Tax
, ''

Prosper Australia Prosper Australia is a non-profit association incorporated in the State of Victoria, Australia dedicated to reforming taxes onto land as articulated by Adam Smith, the Physiocrats, John Stuart Mill, and most notably by Henry George in ''Progr ...

''; retrieved Nov.9, 2009. They have been replaced in Europe and many other locations by a

value-added tax A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end ...

References

Sales taxes {{tax-stub