The Anatomy of the VAT

Author/Editor:

Michael Keen

Publication Date:

May 16, 2013

Electronic Access:

Free Full Text (PDF file size is 1195 KB).Use the free Adobe Acrobat Reader to view this PDF file

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.

Series:

Working Paper No. 13/111

Subject:

English

Publication Date:

May 16, 2013

ISBN/ISSN:

9781484330586/1018-5941

Stock No:

WPIEA2013111

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

28

Please address any questions about this title to publications@imf.org