Bora Cetin

This paper examines the coupling of Value Added Tax (VAT), an indirect tax collected by companies, and physical distribution within Supply Chains. Practical evidence and theoretical analysis indicate, that VAT - against its design principle - financially impacts the involved companies. VAT is a result of ownership transfer in material flows between suppliers, customers, and legally independent businesses of a multinational corporations (MNCs). The costs VAT taxation causes therefore are Supply Chain costs and need to be considered in the optimization of Supply Chains. We explain how VAT taxation causes costs and derive that temporal dispersion of VAT cash flows cause bound capital. Based on this, we conceptionally propose a method for the calculation of the costs.