At present, our VAT calculation feature adds VAT on top of the base item prices you define in Seller Admin, so you should set item prices as not including VAT.
However, this might be changing soon, to accommodate changes to VAT effective 1 Jan. 2015; we will let our clients using VAT calculation know if they will need to change any settings to cooperate with this. See this related forum thread:
The cart will only require buyers to specify a tax/shipping location if they have added any items to their cart which have "Sales Tax/VAT" and/or "Shipping/Buyer's Address" enabled in their product settings. Maybe this explains what you saw in Chrome, if you happened to test with an item that didn't have tax/shipping enabled?
PayPal checkouts will only show added shipping/tax amounts once the buyer has provided their actual shipping address during checkout, so PayPal can contact our system to make sure the shipping/tax charges are appropriate for their location. This prevents confusing or misleading the buyer in case the address they provide does not match the location they'd specified in their cart before checkout, which may change the calculated charges. If the order does not require a shipping address, tax will not be recalculated at checkout, as PayPal does not inform us of the buyer's location in that case until after payment has already been completed.