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Abstract
Value-added tax, or VAT, first introduced less than 50 years ago, is now a pivotal component of tax systems around the world. The rapid and seemingly irresistible rise of the VAT is probably the most important tax development of the latter twentieth century, and certainly the most breathtaking. Written by a team of experts from the IMF, this book examines the remarkable spread and current reach of the innovative tax and draws lessons about the design and implementation of the VAT, as experienced by different countries around the world. How efficient is it as a tax, is it fair, and is it suitable for all countries? These are among the questions raised. This highly informative and well-researched book also looks at the likely future of the tax.
Abstract
Value-Added Tax or VAT, first introduced less than 50 years ago, remained confined to a handful of countries until the late 1960s. Today, however, most countries have a VAT, which raises, on average, about 25 percent of their tax revenue.2 This chapter defines what is meant by a VAT; documents both the remarkable spread and the current reach of the tax; considers the differences between countries with and without the tax; and develops some stylized facts on the typical experience of countries that have adopted a VAT.
Abstract
It is a common fear when a VAT is introduced or extended that there will be an adverse impact on poverty, or on the distribution of real income more generally. Many of the central issues raised by such a concern have been discussed at some length in Chapters 7 and 8 above, which considered the specific design issues of an appropriate rate structure and exemptions for the VAT. But the conceptual and practical considerations at stake are somewhat wider, and have in any event proved sufficiently widespread and powerful to merit explicit consideration. That is the task in this chapter.
Abstract
Experience has taught, sometimes harshly, that a critical decision in designing a VAT is the threshold level of firm size above which registration for the tax is compulsory. This chapter reviews the issues at stake.
Abstract
The next few chapters more systemically address several major issues in administration of the VAT. They focus on areas where the need for strengthened performance has been identified. There are, of course, other areas, such as taxpayer registration and education, and enforcement of arrears, in which there has been important success and hence there is confidence in the basic reform strategy.
Abstract
The VAT can play a pivotal role in developing modern methods of tax administration, based on effectively monitored voluntary compliance. This chapter deals with its role in respect of a key aspect of this approch to tax administration: self-assessment.
Abstract
Audit is often the weakest component of VAT administration. As noted in Chapter 6, among the surveyed countries, audit performance is reported to be a particularly weak aspect of tax administration, irrespective of whether other aspects of the VAT are working well. This chapter discusses the importance of the audit function and the difficulties faced in implementing audit programs.
Abstract
The logic of the VAT requires that some taxpayers, particularly exporters, receive refunds. The practical problems this creates—often among the most troublesome that arise in implementing the VAT—are the topic of this chapter.