The Anatomy of the VAT

May 16, 2013

Preview Citation

Format: Chicago

Michael Keen. The Anatomy of the VAT, (USA: International Monetary Fund, 2013) accessed September 24, 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

This paper sets out some tools for understanding the performance of the value added tax (VAT). Applying a decomposition of VAT revenues (as a share of GDP) to the universe of VATs over the last twenty years, it emerges that developments have been driven much less by changes in standard rates than by changes in ‘C-efficiency’ (an indicator of the departure of the VAT from a perfectly enforced tax levied at a uniform rate on all consumption). Decomposing C-efficiency into a ‘policy gap’ (in turn divided into effects of rate differentiation and exemption) and a ‘compliance’ gap (reflecting imperfect implementation), results pieced together for EU members suggest that the former are in almost all cases far larger than the latter, with rate differentiation and exemptions playing roles that differ quite widely across countries.

Subject: Consumption, Income, National accounts, Revenue performance assessment, Tax efficiency, Tax gap, Taxes, Value-added tax

Keywords: Consumption, Exemption gap, Income, Input VAT, Middle East and Central Asia, Performance of the value added tax, Public goods, Rate gap, Revenue change, Tax compliance, Tax efficiency, Tax gap, Tax gaps, Value added tax, Value-added tax, VAT receipt, VAT revenue, VAT system, Weighted average, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/111
Stock No:

WPIEA2013111
ISBN:

9781484330586
ISSN:

1018-5941

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