My understanding of a VAT, is that the product is taxed whenever "value" is added in the chain. According to the
Wikipedia Article, suppliers are able to deduct the tax they pay on inputs, such that they only pay the government tax on the "value" they add.
This is awkward for bitcoin if it is considered a commodity. That implies that in a country with a 20% VAT, 10 BTC of any 50 BTC coin creation transactions should go to the government as tax. If you buy coins low, and sell them high, you would also pay 20% tax on the profit (if your coin supplier also paid the VAT, 20% on the face value otherwise).
This brings up an awkward situation where it may be considered beneficial to consider bitcoin a currency (and all the expensive regulation that entails) in some countries (like where VAT is a concern), and a commodity in others. If it is a commodity, you you need to secure export and import permits to move Bitcoins across borders?
Edit: I also did not mention that informal transactions totalling less than ~$35 thousand a year are often exempt. As BTC prices rise, more and more miners (and informal traders) may flirt with the threshold.