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Structural Transformation and Tax Efficiency
Author:
Mr. Serhan Cevik
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https://orcid.org/0000-0002-2373-2023
,
Jan Gottschalk null

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,
Mr. Eric Hutton
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,
Laura Jaramillo
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,
Pooja Karnane null

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, and
Moussé Sow
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Series:
IMF Working Papers
Volume/Issue:
Volume 2019: Issue 030
Language:
English
Publication Date:
15 Feb 2019
DOI:
https://doi.org/10.5089/9781484399811.001
ISBN:
9781484399811
ISSN:
1018-5941
Pages:
32
Keywords:
WP; null hypothesis; VAT C-efficiency; real GDP
Legal-disclaimer:
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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Structural transformation has resulted in an increasing share of services in aggregate value-added in advanced and developing countries across the world. We analyze the impact of this shift into services on countries’ efficiency in collecting the value-added tax (VAT). The analysis is based on two alternative measures of VAT efficiency: (1) the VAT C-efficiency, using a broad panel of 134 countries over the period 1970-2014; and (2) the VAT gap using a more granular, proprietary dataset that draws on the results of IMF’s Revenue Administraion-Gap Analysis Program covering 24 countries over the period 2004-2016. We find that a higher share of services in aggregate value-added reduces the VAT efficiency, and that this adverse effect is mainly a result of a rise of non-tradable services, which in turn contributes to a narrowing of the VAT base.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund