Equivalence of the Production and Consumption Methods of Calcuting the Value-Added Tax Base: Application in Zambia

July 1, 1996

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Anthony J. Pellechio, and Catharine Hill. Equivalence of the Production and Consumption Methods of Calcuting the Value-Added Tax Base: Application in Zambia, (USA: International Monetary Fund, 1996) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Two methods of calculating the value-added tax (VAT) base, using production and consumption data, respectively, have been applied in different countries to estimate VAT revenue. It is not apparent that these methods should produce the same result for a particular country because each method requires different adjustments for exemptions. This paper establishes analytically the equivalence of the two methods. Both methods are applied to Zambia. Given the limitations of data, the two methods produce different results, yielding an estimated range for VAT revenue of 2-3 percent of GDP in 1995. Actual VAT revenue collected fell within this range.

Subject: Consumption, Expenditure, Government consumption, National accounts, Private consumption, Taxes, Value-added tax

Keywords: Consumption, Consumption method, Consumption-type VAT, Exempt goods, Government consumption, Intermediate sale, Private consumption, Production method, Revenue estimation, Sale VAT, Value-added tax, VAT base, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1996/067
Stock No:

WPIEA0671996
ISBN:

9781451961584
ISSN:

1018-5941

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