Designing a Progressive VAT
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Summary:
This paper presents a novel approach to addressing VAT regressivity, by proposing the adoption of a progressive VAT: a single-rate, broad-base, VAT, whereby tax paid on consumption is re-paid to lower income households in real-time, at the moment of purchase. Such a system can effectively eliminate regressivity, while minimizing the political economy, cash-flow, and welfare stigma obstacles that are often associated with standard welfare transfers used in modern VAT systems. It would also have other significant advantages, particularly in terms of compliance incentives.
Series:
Working Paper No. 2024/078
Subject:
Consumption Consumption taxes Income Income distribution National accounts Taxes Value-added tax
Frequency:
regular
English
Publication Date:
April 5, 2024
ISBN/ISSN:
9798400271830/1018-5941
Stock No:
WPIEA2024078
Format:
Paper
Pages:
31
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