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Estimating the Base of the Value-Added Tax (VAT) in Developing Countries: The Problem of Exemptions
Author:
Mr. George A Mackenzie
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Series:
IMF Working Papers
Volume/Issue:
Volume 1991: Issue 021
Language:
English
Publication Date:
01 Feb 1991
DOI:
https://doi.org/10.5089/9781451921465.001
ISBN:
9781451921465
ISSN:
1018-5941
Pages:
18
Keywords:
WP; capital goods; tax liability; consumption-type VAT; intermediate sale; taxed goods; n products; VAT base; Consumption; Value-added tax; VAT exemptions; Consumption taxes; Effective tax rate
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Developing countries with VATs typically exempt a large number of goods and services. Following a brief discussion of the rationale for exemptions, this paper presents a formula for the base of a VAT with exemptions. Two basic adjustments must be made to the base without exemptions: subtraction of the value of sales to consumers of exempt industries and addition of intermediate sales of taxable inputs to exempt industries. The paper concludes with a derivation of the elasticity of a VAT with exemptions with respect to aggregate consumption and a discussion of the implications of technological change for the VAT base.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund