Bitcoin is made to be a currency so why the hell does the government even have tax on it? It's not some kinds of product. It's money and the countries which abolish VAT for BTC are the ones which are not high right now
Because all governments currently tax own currency through inflation/money printing. They might eventually want to do the same to bitcoin. The only question is how and if it will succeed.
Putting tax on their own currency is quite easy but on a digital currency with non-government control? That's quite challenging
VAT can be applied for BTC transactions if it will be widely accepted at merchants. If you buy something you get an invoice (you need the invoice in some cases for warranty or whatever). If the merchant gives you the invoice it contains VAT. The merchant should pay the VAT to the government despite of the transaction's currency ( normal or digital), because the payment is income for him. It's the control that can not be applied to BTC because of the decentralized structure of it.
VAT tax will push the price up and noone will buy it at all. Furthermore, The government will have difficulties managing services because they can sell their stuff, services without adding the VAT tax. Not really hard to avoid that VAT
In case you buy something P2P, it's OK that you have a chance to avoid VAT, but if you want to use Bitcoin in shops in town, there you can't avoid VAT so it can be an opportunity while you are only on the web, but if acceptance rises there will be a lot merchant that can't avoid issuing an invoice that contains VAT. So we want to increase the acceptance of BTC but it will bring some disadvantages also.