Chapter

chapter 9 Transitional Problems

Author(s):
Alan Tait
Published Date:
June 1988
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I’ve always said we’re only one President away from a vat.

—Charles E. McLure, Jr., reported in Tax Notes, Tax Analysts (Arlington, Va.) January 12, 1987, p. 93

Academic discussions compare an economy where the vat is operating with the economy and tax system which existed before. Not much attention is paid to the actual problems of getting from the state before vat to the position after vat. That is, the process of change from one state to another is assumed to be instantaneous.

In practice, the introduction of vat should involve some sensitive initiatives on the part of the authorities to educate traders and the public about the new tax and to react with understanding to the concern of taxpayers about taxes already paid before the changeover. In the same way, there are problems about contract prices and continuous supplies that also complicate the changeover. However, the first problem concerns the public’s perception of the vat. Then there are problems about registration, educating traders about vat, and the precise transitional treatment of inventories, capital goods, contract prices, installment prices, and various other small but worrying transitional matters. These topics are dealt with in the next sections.

Publicity

Countries that do not use the vat can build up quite unreasonable fears about its introduction. Politicians argue that it will encourage the growth of the public sector (for instance, as anticipated in the United States), traders expect high compliance costs, and the public resigns itself to inevitable price increases. Publicity is important to explain the new tax and to combat such fears. Without a spirited publicity campaign, there is the danger of hostility in many quarters undermining the vat before it even gets started. However, this point is now well taken, and in some cases the publicity has been so well produced and traders have been so overwhelmed by advice that the actual “VAT date” has been something of an anticlimax.

The authorities must assign a senior officer to be responsible for publicity. He should be involved in the early discussions on the form and structure of the vat and gradually devote more of his time to explaining the application of the vat as its introduction approaches. His activities should include the following:

(1) He should prepare a short explanatory booklet on vat. There are numerous examples of these around the world.1 The format is well established—about 30–50 pages explaining how a vat works, and then an explanation of the broad heads of the legislation in simple language but sufficiently detailed to be useful to different traders.

(2) He should prepare, in collaboration with the technical staff, the staff guide and manual. These publications should be ready for the staff training sessions well in advance (a year) of the date of vat introduction. (See also Chapter 12 on transitional staffing problems.)

(3) He should arrange for talks on radio and television and for press conferences. For instance, the Korean Ministry of Finance prepared and distributed 80 films on VAT; in New Zealand, amusing videos were made illustrating how (mythical) manufacturers of possum bikinis might deal with the vat. Perhaps a little more sedate, the Dutch prepared a series of 13 ten-minute television programs that were screened early on one evening a week, with a second showing later to allow viewers to check up on the information given in the first showing.

(4) He should organize lectures and talks to public and professional groups. The success of vat depends on the cooperation of the traders and for this reason it is important that they should feel their views have been taken into account. Therefore, meetings should be arranged for the authorities to explain the tax to businessmen and trade associations and, most important, for the authorities to listen to what traders have to say. At these meetings, neither the basic principles of the tax nor the rates of vat would be a matter for discussion. Above all, “academic” discussions on such occasions about whether the tax falls on businesses or households are not profitable. What is useful is an exchange of views on the circumstances in which simplified invoices might be used and the particulars to be given on them—price tags and lists, the tax adjustments to be made in connection with discounts, returned goods, bad debts, simplified schemes to enable small and medium-sized retailers to calculate their monthly sales under each of the different rates of vat without having to separate individual transactions, the period for which sales documents would have to be retained, and the procedures relating to the import and export of goods.

The vat representatives might also wish to cover more fundamental matters such as the length of time to be allowed for payment of tax, the possibility of deferring payment of vat on imports until the lodgment of the next monthly return, and even the question of having less frequent tax returns. It is of immense assistance in launching the new vat if it is demonstrated to the trade representatives that their views are not only listened to, but are, where acceptable, acted upon.

The various organizations, interested professional associations, and chambers of commerce should be invited to submit their observations in writing within a certain time limit. These should be critically analyzed by the members of the central vat coordinating unit and concise memoranda prepared for the consideration of the vat commission or the ministry of finance on the revenue cost and administrative feasibility of the various suggestions.

In at least one case (New Zealand), the authorities employed a private sector businessman to organize the public relations for vat (the GST Coordinating Office), including publicity, television, and videotape commercials. This appears to have been a most successful experiment.2

The Coordinating Office has at least three functions: “to explain the tax reform; to raise the level of public understanding; and to co-ordinate the efforts of the various organisations involved in the [VAT] education programme.”3 A nonpolitical organization, the Coordinating Office prepared and supplied leaflets and specialized booklets to households and various trade groups such as taxi proprietors, clubs, associations, charities, and farmers.

Finally, in at least one case (Korea), the authorities organized three nationwide test runs to try out the new tax. In March, May, and July 1977, over 90 percent of the traders in the sample group concerned completed trial run filing exercises.

Registration

The vat taxpayers must register, usually at their local office, before the tax starts. Regulations try to encourage registration some three months before the actual firm date for goods and services becoming liable to VAT; this allows the officials to get the computer and files readied, and avoids a log jam in a last minute hectic rush to register. One country (Indonesia) was remarkably generous in setting the date for the initial registration some three months after the start of the tax and this led to a slow initial rate of registration; a week before the vat was due to start, only some 23,000 out of a potential 100,000 traders had registered. To have a smooth introduction of vat, it is important that as many taxpayers as possible should be registered well in advance, and certainly before the introduction date. Then publicity material can be sent to registered traders and educational visits made. Registration involves recording the taxpayer’s name, the firm’s name and address, telephone number, date of registration, date of commencement of business, and the allocation of a vat registration number. For statistical purposes, it is also useful to record the trade or industrial classification of the business.

Once the tax is in place, it is sometimes overlooked by commentators that the registration “churns” as new taxpayers enter the list and firms disappear. This churning creates a considerable administrative burden. It can be lessened by some concessions: for instance, by allowing small clubs or associations to register in the name of the club, rather than having to reregister each time the annually elected secretary changes, or by not requiring reregistration when one person of a partnership changes—see Chapter 17. Nevertheless, in general, there is a continuous onerous burden in keeping the vat register up to date.

It is interesting that experience in some countries suggests that small taxpayers seem to see benefits in registration that outweigh the costs of compliance. Apart from the obvious benefits of receiving net refunds when large capital purchases are made and getting credit for inputs, there is the “avoidance of the appearance of commercial insignificance which accompanies nonregistration.”4 Having a vat registration number on your invoices looks more organized and important. This is true particularly for the professions where the absence of a registration number betrays the fact of low turnover and when the client frequently is registered and wishes to claim a deduction for vat paid.

Educational Visits

No matter how efficient the publicity about the vat is, the most effective way to ensure that traders fully appreciate their obligations and rights under the vat is the educational visit by officials from the local or district vat office. Naturally, these visits should be made before the vat is introduced. In practice, this is not always possible, but an educational visit should be paid to every trader not later than six months after vat starts.

For many small and medium-size firms, the educational visit from the district tax office may well be the first opportunity they have of relating the legal requirements of vat to their own particular situation. The impression of helpfulness and understanding of the taxpayers’ problems by the local officials can contribute greatly to the successful launching of vat and its future smooth administration. While the visiting officers should not be naive, the approach must be on the assumption that whatever may have been the position in the past, the great majority of taxable firms will be anxious to fulfill their obligations conscientiously. In most countries now using vat, it was found that however extensive the overall publicity may have been, the general run of traders were puzzled by the implications of vat and were in need of direct guidance on how to comply correctly, rather than having any intention to be dishonest.

The time available for each visit will be limited (in the Netherlands, for instance, the preliminary visit lasted only one and a half hours, but even so involved some 600 tax administrators to get all the visits done in time); but it serves no purpose unless it affords a taxable firm every opportunity to have its questions amply explained.

The following are an indication of the points that should be covered by the officials.

General

(1) Interview the owner or other responsible representative of the business.

(2) Confirm that the particulars on the application form for registration are correct.

(3) Check that the name agrees precisely with the official record.

(4) Confirm that the trader is chargeable to vat by reference to the nature of his activities.

(5) If a trade classification coding is provided, confirm that the business is classified correctly.

(6) Give the taxpayer a copy of the vat guide if he has not already received one. Check whether he appreciates the implication of vat in relation to both purchases and sales. Clear up any points of difficulty.

(7) Draw particular attention to the chapter in the guide dealing with the completion of the returns and payment of tax and emphasize the importance and obligation to file returns and pay tax promptly.

(8) Ensure that the point when vat becomes due is clear and unambiguous.

Invoices, Records, and Accounts

(1) Confirm that the firm has established a proper system of recording particulars of all invoices of purchases and sales.

(2) Unless the firm already has a satisfactory bookkeeping system in operation, provide a copy of the official accounts book for vat if one is issued.

(3) Ensure that whatever system is adopted in relation to vat it will provide for:

(a) Accounting for tax on all taxable supplies, including taxable self-deliveries.

(b) Proper recording of tax paid on taxable purchases and services and that only inputs that are properly deductible are claimed.

(c) Correct calculation of apportionment between taxable and exempt elements in the case of partly exempt activities.

(d) A system under which claims for repayment can be effectively checked by the local tax office.

(e) A vat account being properly set up and maintained.

(f) Any distinction between current vat obligations and year-end obligations (reconciliations).

Premises

Inspect factory premises—workrooms, stores, warehouses, showrooms, and so on and consider whether all activities are correctly reflected in the return made for vat.

Transitional Problems: Stocks and Inventories

The vat frequently replaces sales taxes that have been incorporated in stocks and capital. If the tax replaced is, say, a single-stage tax, calculation of the tax content of inventories is relatively easy. If the tax replaced is a cascade turnover tax, then broad estimates must be made. For instance, in the Netherlands, refunds were made on the basis of a special list prepared by the Ministry of Finance, giving the turnover tax content of various goods that it would have been legitimate to refund had the goods been exported on December 31, 1968.5 However, the basic question is whether such relief should be given at all. Some countries give it fully (Korea), others over time (the Netherlands and the United Kingdom), some partially (New Zealand), and some not at all (Chile and Indonesia).

Why Relief Is Justified

Most countries do grant some relief for taxes previously paid and included in the value of stock in trade (and stationery). Three main reasons can justify such treatment. First, from the point of view of equity, if no relief is allowed for the previous tax when goods taxed under the earlier regime are sold, there will be double taxation because some of the old tax would be included in the base on which the new tax is levied. Second, and more important from the point of view of getting vat launched successfully, would be the danger of manufacturers increasing their prices unduly and permanently at the time of the changeover to compensate themselves for that temporary element of double taxation. Third, manufacturers might cut down their holdings of taxable raw materials and some processed goods during the period running up to the vat introduction, planning to replenish them after vat comes into force. This could disrupt trade, cause bottlenecks, and distort the opening months of the vat.

How Relief Is Calculated

There are two basic ways to refund the sales tax previous to vat on stocks. First, there can be a physical inventory of merchandise. The risk of this is that the inventory may be botched or done too casually, erring in favor of the company. Monitoring such physical inventories is extremely difficult. In practice, the traders’ estimates have to be accepted unless their claims are wildly out of line with their previous pattern of trading. This leads to the second method; if a check has to be made in any case to assess how their physical inventory claim compares with the usual pattern of trading stocks, why not simply base the allowance on an average of their previous year’s stocks? Or the previous year’s quarter matching that before the vat is to be introduced? This is basically what the Portuguese authorities allowed. Unfortunately, the law authorizing this treatment was published in August 1985, the year before the vat was introduced on January 1, 1986. This, of course, allowed traders to anticipate their claims and perhaps artificially inflate their inventories for the last quarter of 1984, knowing this would validate their inventory for the last quarter of 1985, before the vat was introduced. Another danger of using this method is that some firms, say, those with rapidly increasing needs for stocks, might be treated unfairly. This was also recognized in Portugal and a later law allowed a refund based on actual inventories as an option, provided that stock rotated in less than six months.

Generally, as the “average holding method” is likely to create many inequities, it may be better to require, at least on paper, a physical inventory.

Persons Who May Claim Relief and Methods of Making Claims

Only persons registered for vat are entitled to relief for tax paid on stock in trade held at the date of the changeover. Moreover, it is not necessarily true for all registered persons in all tax systems; for example, manufacturers do not pay a wholesale tax, therefore, no question of double taxation arises in relation to their inventories and there is no case for relief. Traders wishing to claim relief must make a detailed valuation of stock on hand, or relate their stocks to some average holding at the changeover date, or within a period of, say, ten days before or after that date, showing appropriate adjustments for purchases and sales in the interim. They have to submit their claims on a prescribed form. To anticipate that some might try to inflate their inventories spuriously to claim a rebate for tax they never paid, reference on the form can be made, as mentioned above, to an average monthly amount of inventory. Forms for this purpose should be issued to all persons registered for vat.

Stock Qualifying for Relief

Relief is confined to stock in trade (inventory) held in the country, provided that the stocks have borne the previous tax now being replaced.

For the purposes of relief, stock-in-trade comprises:

(1) Goods the taxpayer had bought for resale.

(2) Goods that the taxpayer had manufactured for sale (including partly manufactured goods and by-products.

(3) Raw materials and semiprocessed goods.

(4) Repair materials.

(5) Materials that are used in the manufacturing process, such as fuel, lubricating oil, detergents, and chemicals.

(6) Stationery, which is often allowed as a stock on which sales tax has been paid, although it is not strictly a stock in trade (see below).

No relief is granted for:

(1) Goods held outside the country or in a bonded warehouse or a duty-free shop.

(2) Goods awaiting clearance inward through the customs.

(3) Goods that have been cleared outward through the customs.

(4) Investment goods such as buildings, plant, machinery, and office furniture.

(5) Expense stock, such as loose tools and office stationery.

In general, as mentioned above, an actual physical stocktaking is probably required as near as possible to the changeover date. Where feasible, the stock should be listed at cost price, but for goods in the process of manufacture a different method of valuation has to be adopted. The situation in relation to different categories of taxpayers is examined in more detail below.

Treatment of Manufacturers, Wholesalers, and Retailers

No difficulty arises as regards raw materials for which proof of the sales tax borne on the stock is readily available. The same applies to goods in various stages of manufacture when the purchasers of the raw materials can produce invoices. The position is more complicated, however, if the tax has been suffered at one or more stages back from the manufacture of the final product or has cascaded through the distribution chain. A claim for such prior-stage tax should not be admitted without documentary proof of the tax base, or on the basis of typical examples furnished by the traders, although a generous interpretation should be applied in determining the amount of the relief where precise calculation would not be practicable and where the claim appears well founded.

Construction Industry

The stock qualifying for relief consists of building materials on hand and work in progress. For work in progress, the value on which relief is given is that relating to the proportion of the contract completed on the date of introduction of vat, less any progress payments made up to then. The phrase used in New Zealand was “to the extent that materials and other work have been permanently incorporated in or affixed on the work on site.”6 The value of the work in progress includes the value of any work done by any subcontractor engaged by the main contractor. The subcontractors are entitled to relief for work in progress. To preclude double relief being granted, the value of the work in progress by the main contractor would have to be reduced by the value of the work of the subcontractors in progress. The figures would be determined by reference to recognized valuation practices carried out by an independent valuer.

Treatment of Importers

The vat is imposed on the value of imports including customs duty, and this applies whether the importer is or is not a registered person. At the start of vat, the importer will have on his hands goods imported by him which may have borne an existing sales tax at the time of importation and will be chargeable to vat when they are subsequently sold. To avoid double taxation, the importer must be given relief for the amount of the previous sales tax paid on importation. This should be determined with precision from the import entry documents.

How Relief Is Given and Checked

A claim for stock relief should be submitted to the district tax office during the first taxable period after the introduction of vat. Separate types of claim forms might be provided for (1) manufacturers, (2) building contractors, and (3) importers. The forms are issued automatically to all persons registered for vat. The claim form incorporates stock sheets for completion by the claimant, and full details would have to be given of the different types of stock involved with valuations and the amount of sales tax borne on them.

In the local offices, the small claims would merely be checked for arithmetical accuracy, and the inventory compared with past returns made by the taxpayers. A field check should be made in perhaps 5 percent of the cases, or where vat educational or explanatory calls are made on the factory, warehouse, or business premises. The larger claims might be examined more critically, especially with regard to the nature of the business, the kind of stock declared to be on hand, and the value of such stock in relation to the known sales or other information available in the tax office. Some traders should be selected for full examination at the taxpayer’s premises. Large claims for relief should be authorized only after personal verification by the district chief. If, for any claim, it is evident that an excessive amount is erroneously included, an appropriate reduction should be made. Such adjustments can be contentious. In the words of one official, they were “energetically disputed.” However, if definite evidence of fraud is established, such as a claim for nonexistent stock, there should be a prosecution for penalties and full publicity given to the court proceedings.7

Transitional Problems: Capital Goods

In a number of European countries, the cost of relief for inventory stock and capital goods held at the introduction of vat was so high the relief had to be spread over one or two years.

There is a connection between the relief for stock in trade and the often parallel problem of previously traded capital goods relieved of tax under the vat. If nothing is done to anticipate this sudden reversal, it is likely that in the period before vat traders will delay buying taxable capital goods until they can claim the full credit under vat. To give the credit immediately on the changeover invites bottlenecks in capital goods orders. If the existing taxes are computed and are significant, some prorating of the full relief under vat may be desirable.

In the Netherlands, the total cost of the relief was f. 1.6 billion, equivalent to 32 percent of the turnover tax receipts in 1968.

The refunds on inventories were financed from the proceeds of a temporary investment levy, that is, the full deduction for tax paid on capital goods was not granted immediately, but was phased in gradually. The aggregate burden of turnover tax on capital goods in 1968 was estimated at 9 per cent of value. An immediate full credit would have involved a budgetary loss estimated at f. 5.0 billion, a sacrifice the Government was not prepared to make. Moreover, the credit would have encouraged businessmen to defer their purchases of capital equipment. The credit, therefore, was phased in, initially over a 3-year period, according to a scheme of 30-60-90 per cent of the tax. For budgetary reasons, the scheme was later extended by one year and changed twice. Ships, airplanes, and machinery used in the textile and shoe industries were exempted from the investment levy since these goods had not borne turnover tax or were utilized in depressed sectors. Actual receipts of the levy were estimated at f. 3.8 billion, or 13 per cent of total value-added tax revenues from 1969–72. Since the tax on capital goods would be completely eliminated under the new tax, it was decided that the investment allowance under the income tax would be phased out simultaneously.8

Table 9-1 gives some examples of the different treatments. Budgetary as well as economic considerations are involved because granting full vat credit immediately on capital equipment means a substantial loss of revenue, and encourages the deferral of purchases of such goods until after the start of vat. In the Federal Republic of Germany, for example, the cumulative burden of the old tax on plant and machinery was estimated to be 8 percent. The solution adopted was to allow full credit for capital goods bought after the changeover, but at the same time a special investment tax on capital expenditure was imposed from the changeover to vat. It was set at 8 percent for the first year to correspond with the approximate burden of the former cumulative tax. It was reduced by stages over the succeeding five years after which it no longer applied. Provisions along rather similar lines were adopted in Belgium and, as mentioned above, in the Netherlands. Presumably some such transitional provision for capital goods might be made when South Africa substitutes a vat for the present sales tax that taxes capital goods.

Table 9-1.VAT: Special Transitional Measures in Selected Countries
Year vat IntroducedFixed Business Assetslnventories
Austria1973A tax was levied at 12 percent in 1973 declining to 2 percent by 1977 and abolished in 1979; thus assets that had been taxed before vat were only gradually freed from taxation
Belgium1971Only a partial credit (increasing during 1971–77) was allowedRefunds spread over 1971–75, one third of which paid in treasury certificates with specific redemption dates
Chile1975No credit given
France1968Investment goods acquired in 1966 by enterprises liable to vat were allowed full credit; those not subject to vat received no credit; those subject to vat for the first time in 1968 received only 50 percent creditFull credit allowed spread over six years
Germany, Fed. Rep. of1968A tax of 11 percent levied from 1973 to 1975
Hungary1988No relief allowedFull relief given by a price index
Indonesia1985No credit given
Ireland1972Investment goods were not taxed before VATFull allowance for wholesale tax
Italy1973The turnover tax paid on assets acquired before the vat introduction but after June 1972 could be credited against vat provided that the deduction did not exceed one half of the vat due25 percent of the turnover tax paid on raw materials and semifinished goods bought after August 1971 could be credited against VAT
Korea1977Full relief for replaced taxes in inventories
Luxembourg1970During 1970–72 a partial credit allowed: 50 percent in 1970 and up to 85 percent in 1972Full refund of the cascade turnover tax
Mexico1980Credits allowed of 6 percent in the commercial sector and 4 percent for industrial firms for the 4 percent cascade tax
Netherlands1969Credit phased in over a period of a few years at 30-30-60-67 percent of taxRefunds spread over two years
Norway1970Tax of 13 percent levied on all business assets
Sweden1968A temporary 10 percent investment allowance granted in 1968 to encourage businesses not to delay their investment decisionsThe old single-stage retail tax meant inventories were not taxed
United Kingdom1973Assets were already free of taxAny wholesale tax paid was refunded in full when the food was sold from stock
Source: Various country reports.
Source: Various country reports.

Other Transitional Problems

Continuous Supplies

It is not practicable to start charging vat on continuous supplies, such as electricity and gas, on the day vat is introduced. In most countries such a charge is levied from the date of the first meter reading after the start of vat. If supplies are not metered or the continuous supply is at a fixed periodic rate, vat can be charged proportionally based on the period covered by vat over the total period covered.

Effects on Contract Prices

Contracts entered into at a fixed price before vat should have their prices adjusted by the amount of the vat applicable from the date of introduction. This would include contracts for continuous hiring or leasing (to which the proposals given in the section on “Construction Industry,” above should also be applied where appropriate). Interestingly enough, this even applied to membership subscriptions in New Zealand and it was suggested that clubs might increase subscriptions at the beginning of the year to anticipate the introduction of vat and their tax liability.9

Supplies: Treatment of Installment Payments

The treatment of installment payments made after the changeover to vat for supplies made before the start of vat gave rise to difficulties in some countries. The normal practice is that where the charge to vat for goods purchased under an installment arrangement is the delivery of the goods, no charge is made on installments after the introduction of vat. In such cases the title of ownership has legally passed before the changeover to vat. On the other hand, if the title does not pass until payment of the final installment, the change to vat normally applies only to the payments made after the introduction of vat.

Exports Already Taxed

Some goods may have borne a sales tax, now replaced by the vat, but are to be exported after the introduction of the vat. Obviously, if at all possible, refunds should be granted in such cases. If this proves impossible, the difficulty is likely to be very temporary and advance notices, drawing attention to the problem, can help exporters anticipate such a tax liability arising, so that they can time their exports to ensure that as much as possible occurs under the new, and more advantageous, vat.

Problems from Different Definitions of Taxable Transactions

The vat legislation usually defines a taxable transaction and tax due date as the invoicing of goods (the essential element of the invoice VAT) or the performance of services. If the delivery of goods happens earlier, the vat liability may be defined at that moment. Other sales taxes may use different definitions; for example, on a turnover tax it could be the sale of goods and not their delivery that determines when the tax is due.

Depending on the relative rates of vat and the sales taxes it replaces, taxpayers may have incentives to predate their invoices or deliveries or both to reduce their tax liabilities. Special transitional provisions may be needed to cope with this sort of falsification; the first and last sequence numbers of invoices over the transitional period must be reported on the tax return. A taxpayer may be required to calculate and record periodic running totals in his account books.

Changes in VAT Rates and Liability to VAT

Finally, it should be noted that many of the problems discussed above are repeated, albeit in less serious ways, when the rates at which vat is levied change, when the tax base is changed, and sometimes when traders register for the first time or when they deregister. Examples abound:

Alterations and other home improvements, previously zero-rated, become liable to vat at the standard rate of 15 percent on June 1, 1984. The government has refused to include any transitional provisions in the Finance Bill to deal with the problems, despite strong representations, so leaving the ordinary rules of law to apply. The sharp change of rate combined with the long lead-time on contracts in this industry make the problems more serious than those that have occurred on previous rate changes. . . . Consumer advice agencies have, predictably, been inundated with enquiries as to liability to pay, vat in these circumstances. The position taken by vat Offices is that ‘the application of [the rules] in any particular case depends on the terms of the contract between the parties concerned; Customs and Excise cannot advise on individual cases.’10

Generally, vat authorities are reluctant to create special provisions for such transitory costs consequent on rate changes or changes in definition; besides, vat is exceptionally well suited to avoid the usual problems associated with the inventory costs of excises and single-stage pre-retail taxes where rates change, since full credit is claimed automatically under the vat.

See the description of the introduction of vat in New Zealand in Douglas (1987, pp. 217–21).

Douglas (1987, p. 218).

Turnier(1984, p. 459).

Cnossen (1981, p. 228).

New Zealand, GST Coordinating Office, Understanding GST: A Guide to the Legislation (1986, p. 26).

An interesting twist to the problems of stocks at the changeover to vat occurred in Morocco, when some traders in Casablanca complained that the vat would mean they would find it more difficult to “launder” illegal stocks of contraband and goods stolen from factories and from the port; they proposed a solution whereby the Ministry of Finance would “shut its eyes” to the existence and disposal of illegal stocks. Habibi (1986, p. 58).

Cnossen (1981, p. 228).

New Zealand, GST Coordinating Office, Clubs, Charities and Associations & GST (1986, pp. 15–16).

Bragg and Williams (1984, p. 214).

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