Enabling the tax submodule and adding a tax type of VAT does nothing on it's own and no VAT is shown on the cart

I must be doing something wrong here but if I enable the tax module, add a tax type of European VAT no VAT is being added on at the cart.

If I enable the "Display taxes of this type inclusive in product prices." checkbox, VAT is then added on the cart page, but the line items in the order all display with VAT added too and the sub total = total. From another post elsewhere on drupal.org I believe that the VAT should be being added on the cart if the box is unchecked too?