How does VAT tax work with MageRewards if VAT is included in the catalog price?
You just need to understand how VAT works in the Magento system for some store owners, then it will make sense why MageRewards gives points like this and you can adjust to meet your need. For shopping cart distribution rules it's normal, but in the catalog the lines become fuzzy.
Some stores, specifically those outside the US, store the product tax within the product price in the Magento database. For Magento, this was unexpected during early stages of development. The unexpectedness is evident through the code, but as well Magento's CTO, Yoav told me this in person when we met at a developer conference. To compensate, the Magento team coded an option that deducts the tax from the price, and reads it into the system. From an engineering stance, this is messy because the value of the price stored in the database is dependent on the external store configuration.
MageRewards only rewards customers for prices before tax only. It may seem confusing to see in YOUR store $50 => 47 points (if 6% VAT), but in fact it would be just as confusing if the price did not include tax. This is because on other sections when the tax is 'removed' from the product price, the points will also appear wrong in the other case.
If you really want to award customers for tax, you can increase the amount that customers earn for their purchases in the catalog relative to the price with points. That is, if your tax is 12% = 0.12, then you need to increase your rewarding ration by 1/(1+0.12). So if you reward 1 points for every $10 spent, change this to 10 for every $10/(1+0.12) spent; which is 1 points for every $8.9286 (approx). If you do this, a $50 price including 12% tax would reward the customer 5 points instead of 4 points.
Here is an example of shopping cart earning rule for VAT products and NON-VAT products.