## _pdp02 - conclusion

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---

### Applicability and context
- Issues apply more directly to developing countries where much revenue tends to be collected from large taxpayers and the critical mass of medium taxpayers may remain relatively small; small taxpayers may be a good potential source of collectible revenue.
- In developed countries, most revenue is collected from medium-sized taxpayers (the fat tails of the income and wealth distributions get thinner with economic growth).
- The paper’s analysis relates mainly to the small taxpayer, particularly in developing countries, with lessons drawn also from experiences of more developed countries.
- Table 1 (Selected Countries: Percentage Composition of GDP, 1985-2000) highlights sectoral shifts:
  - Brazil:
    - Agriculture 1985 11.54, 1990 8.10, 1995 9.01, 2000 7.38
    - Industry 1985 45.31, 1990 38.69, 1995 36.67, 2000 28.29
    - Services 1985 43.15, 1990 53.21, 1995 54.32, 2000 64.33
  - China:
    - Agriculture 1985 28.35, 1990 27.05, 1995 20.51, 2000 15.90
    - Industry 1985 43.13, 1990 41.61, 1995 48.80, 2000 50.88
    - Services 1985 28.52, 1990 31.34, 1995 30.69, 2000 33.22
  - India:
    - Agriculture 1985 33.72, 1990 31.27, 1995 28.24, 2000 24.90
    - Industry 1985 26.40, 1990 27.64, 1995 28.12, 2000 26.92
    - Services 1985 39.88, 1990 41.10, 1995 43.64, 2000 48.18
- Conclusion: small taxpayers—especially in services—must be assimilated into overall tax administration rather than assigned permanent secondary or minimalist regimes.

### The small taxpayer: problem statement and empirical observations
- Historical shift in perception:
  - From marginal and habitual evaders (1950s–1970s) to engines of growth (from early 1980s), especially as services expand.
- High compliance costs for small taxpayers are attributed to complex tax structures and scarce tax administration resources allocated to them; these factors can lead to avoidance or evasion behavior.
- Developed-country studies referenced:
  - New Zealand GST study (Ritchie, 2001): “Businesses with computerized accounting systems report a very minimal amount of time spent on end-of-year tax activities” and monthly/twice-monthly PAYE reduced time burdens.
  - Australian GST study (Pope and Rametse, 2001): start-up costs ~ A$ 3,000 and 70 hours per small business; compliance costs remain higher for small businesses (2 percent of a turnover of say A$100,000) than for larger businesses (0.04 percent of a turnover of say A$2 million).
- Two main conclusions from recent studies:
  - Small taxpayers tend to receive less administrative attention while governments may expect them to serve as unpaid tax collectors through PAYG systems.
  - Administrative resources are geared to medium and large taxpayers with higher expected yield; this tendency is likely amplified in developing countries with scarce resources.
- Policy implication: scale up quality and focus of administrative resources for small taxpayers to enable graduation to general tax treatment.

### Constructing the small taxpayer: definitions and issues
- Key questions for “single tax” or special regimes:
  1. Which taxes to include (income tax, consumption tax, excise tax, social security tax)?
  2. Where to draw dividing line between small and next category?
  3. Does a single tax reduce evasion?
  4. Are there better alternatives within the regular tax structure?
- The concept of a single tax lacks strong economic basis; treating each tax separately is more logical.
  - Social security contributions should not be mixed into a single tax because they alter employer/employee incentives and long-run social security balances.
  - For income tax the small taxpayer could be subject to a minimum tax; for VAT a threshold with voluntary opt-in is preferable.
- Separating small taxpayers:
  - Cutoffs are often pragmatic and politically influenced; gross turnover is commonly used as a compromise though it may lack economic relevance.
  - Demarcation incentives:
    - Clustering below thresholds and fragmentation within business families to avoid thresholds.
    - Example audit targeting: about 5 percent of taxpayers targeted annually, implying a probability of being audited every twenty years; small taxpayers almost never get audited under typical frameworks.
    - These incentives distort resource allocation and reduce production efficiency (cited simulation evidence by Keen and Mintz, 2004).
- Single-tax regimes have often yielded little revenue and not meaningfully reduced evasion (experiences in Argentina and India):
  - Argentina monotributo: preliminary reports indicated less than 5 percent of participants were new registrants; impact on revenue marginal—1.4 percent of total revenue in 2000, declining to 0.9 percent of total revenue in 2002 (Salim, 2002).
  - India’s simplified scheme (1400 Levy) was discontinued in 1997 amid mistrust and apathy; it did not generate confidence among target taxpayers.
- Recommended reporting and progression metrics when size-based regimes exist:
  - Annual reporting on increase in taxpayer register/roll below the threshold.
  - Trend in relative allocation of administrative resources between small, medium and large taxpayer units.
  - Annual calculation of decrease in revenue loss as taxpayers graduate above the small threshold.
  - Progressive lowering of thresholds as part of tax system development.

### Tax simplification and administrative design
- Simplification of tax statutes reduces compliance costs (examples: multiple VAT rates/exemptions and rapidly changing VAT regulations increase costs).
  - Klun (2003): rapid changes in VAT regulations during 2000-01 in Slovenia raised compliance costs.
  - Steuerle (1999) for the United States: reduce complexity via organization, improved information, and fewer forms.
  - Bardsley (1995) for Australia: simplification should lead to expansion at the smaller end and contraction at the larger end of the small business sector.
- Even if short- to medium-term small taxpayer separation persists, targeting should ensure balance in administration consistent with original tax policy intentions.

### Appropriate taxation of small taxpayers — income tax
- Three taxes relevant to small/micro businesses: income tax, VAT, social security tax. Design substitutes to correspond closely to main tax structure and report graduations to the regular system.
- Income tax for small businesses:
  - Best method: minimum alternate tax (MAT).
  - MAT bases used internationally: gross assets, book profits, turnover, net worth; Latin America examples include gross assets-based MAT (Argentina, Ecuador, Mexico, Peru); net worth-based MAT used in Colombia and India (but susceptible to base erosion).
  - Gross assets-based MAT minimizes manipulation and improves economic efficiency.
  - Turnover-based MAT used in some African countries where turnover is easily measurable.
  - For small businesses, recommend MAT based on combination: gross assets and turnover, whichever is greater, to cover manufacturing (asset-intensive) and services (turnover-intensive).
- MAT mechanics and efficiency example:
  - Example: business income tax rate 35 percent; average rate of return on gross assets 5 percent → MAT = 1.75 percent (35 X .05).
  - Allow ten or fifteen year loss carry forward and backward to smooth burden (Mexico example).
- Alternatives:
  - Cash-flow type tax used in Mexico for small agricultural sector: simple but yields low revenue and grants immediate full depreciation, narrowing base and requiring a higher rate for revenue adequacy.
- Recommendation: implement MAT-like arrangement based on gross assets and turnover (whichever yields higher) with regular reporting on graduations to full income tax filing; MAT continues to apply thereafter.

### Appropriate taxation of small taxpayers — VAT
- Suitable VAT regime: place small businesses below a threshold with voluntary opt-in and require regular reporting on:
  1. Businesses remaining under threshold for many years with rationalization.
  2. Rate of change in taxpayer registers, especially the small taxpayer register, with explanations.
- Do not club small VAT payers with income tax liabilities.
- Factors leading to low VAT yields:
  1. A high VAT threshold.
  2. Undercoverage of services in the VAT base.
  3. Hiding by medium-sized enterprises under the threshold.
- Example of adverse market mechanics: secondary market for VAT invoices where small taxpayers (below threshold) are suppliers of invoices sold to large VAT payers to claim input tax credits—distorts incidence and encourages evasion.
- Revenue productivity benchmarks:
  - Chile: collects over 8 percent of GDP in VAT revenue with an 18 percent VAT (implying nearly ½ X percent of GDP with an X percent VAT).
  - General empirical range: countries tend to collect between 1/3 X percent and 2/5 X percent of GDP in VAT revenue with an X percent VAT (Shome, 2002).
  - A VAT collection below 1/3 X percent of GDP at rate X typically signifies either excluding many services from the positive list or allowing a very high threshold.
- Policy priorities:
  - Include as many services as possible in the VAT base, preferably via a “negative list” for services rather than taxing services via a restrictive “positive list.”
  - Maintain an ongoing program to move taxpayers progressively from the small category to the regular VAT category.
- Implementation challenges:
  - Strong small business lobbies can resist VAT extension.
  - VAT administrations may devalue extension efforts based on operational difficulty; nonetheless, vigilance and targeted administration are essential given negative ramifications of large sectors remaining below the VAT threshold.

### Social Security Tax
- The social security tax can impinge upon small businesses if they are required to perform an administrative withholding function, thereby raising compliance costs for small businesses.
- Country experiences: Australia and New Zealand have investigated this issue; in several Latin American countries businesses are allowed to use withheld money for a short period (e.g., a week) before transferring it to Government. The VAT in Colombia is cited as an example.
- Administrations often oppose the private sector’s “free” use of public funds, but this use can be interpreted as compensation for the free administrative service the private sector performs. The critical design element is the length of time between withholding from employees and transfer to Government.
- The same principle may be applied to social security tax and income tax withholding: small businesses may be allowed to transfer withheld tax after a prescribed period of time.
- This would permit small businesses to perform important administrative functions for income tax, VAT, and social security tax, provided they are registered and paying regular taxes. Only when registered and regular taxpayers can small businesses be relied upon to perform governmental support functions adequately.

### Concluding Remarks — Major findings
- Large Taxpayer Units (LTUs) have been established in almost all modern tax administrations in developing countries in Latin America and Asia because a small number—anywhere between 1,000 and 50,000—of large taxpayers contribute between 80-90 percent of the tax revenue collected.
- The revenue stability from the LTU model should be extended to other taxpayers, with special care to expand the taxpayer base and allocate administrative resources to bring small taxpayers into the tax net without unduly high costs to revenue administration. The strategy must include a credible threat of audits for all taxpayers.
- Concern about sustainability of LTU-introduced reforms: tax administrations may lack an overall reform strategy to extend LTU modernization to medium-size and small taxpayers (Baer and others (2002)). A well-defined strategy to target small taxpayers is needed.
- Small to medium taxpayers in Asia and Latin America can possess significant revenue contribution potential, possibly a quarter of the total (depending on thresholds). Separation of taxpayers by size and subjecting them to different regimes could distort resource allocation and harm long-run economic growth and revenue potential unless an overall reform strategy is implemented.
- Structural changes (privatization of large public enterprises and utilities) have expanded self-employment in small-scale services and manufacturing; captive revenue sources have given way to smaller entities with revenue potential, increasing the need to address the growing pool of small taxpayers.
- “Single tax” (monotributo) regimes that scale back taxation on small taxpayers typically collect less tax than their potential, increasing inequity, discouraging graduation from the regime, and exacerbating tax evasion (including encouraging a secondary market for VAT invoices). Single tax regimes also induce inefficiency by encouraging allocation toward lower-taxed sectors. Tax policy experts generally prefer tax simplification rather than separation by taxpayer size. A clearly defined strategy to phase out a single tax is recommended if it exists.

### Policy recommendations (explicit)
- (i) Income tax: Subject small taxpayers to a Minimum Alternate Tax (MAT) based on both gross assets and turnover, whichever yields higher revenue. The tax rate of MAT should be set to equivalence with the lower marginal income tax rate under the assumption of a reasonable rate of return on capital.
- (ii) VAT: Establish a threshold below which small taxpayers would function; the threshold should not be inappropriately high. Small taxpayers should be allowed to opt into the general VAT system. VAT administration should regularly report the pace at which small taxpayers are graduating from below the threshold.
- (iii) Social security tax: Give small taxpayers a reasonable period for utilization of the money they withhold before transferring it to government, as indirect compensation for the free withholding and transfer service they perform for government.
- (iv) Single tax: Do not enact a single tax covering all taxes—income tax, VAT, social security tax, or other taxes—that small taxpayers are liable to pay.

### Administrative and reporting enhancements recommended
- Regularly report:
  - (i) the increase in taxpayer register/roll below the threshold;
  - (ii) the trend in the relative allocation of administration resources between small, medium and large taxpayer units; and
  - (iii) an annual calculation of the decrease in revenue loss as more taxpayers graduate above the threshold.
- Emphasize tax simplification to ensure tax practices reflect tax policy intentions as expressed in the tax statute.
- Limit executive orders that create tax arrangements for administrative convenience per se, because while they may facilitate operations short run they can divert the tax system away from principles of efficiency and equity. These principles should remain central to encourage long run economic growth and robust revenue productivity.

*Source: _pdp02 - conclusion.*

### conclusion.

### _pdp02 - conclusion.

### Applicability and context
- Issues apply more directly to developing countries where much revenue tends to be collected from large taxpayers and the critical mass of medium taxpayers may remain relatively small; small taxpayers may be a good potential source of collectible revenue.
- In developed countries, most revenue is collected from medium-sized taxpayers (the fat tails of the income and wealth distributions get thinner with economic growth).
- The paper’s analysis relates mainly to the small taxpayer, particularly in developing countries, with lessons drawn also from experiences of more developed countries.
- Table 1 (Selected Countries: Percentage Composition of GDP, 1985-2000) highlights sectoral shifts in Brazil, China, and India:
  - Brazil: Agriculture 1985 11.54, 1990 8.10, 1995 9.01, 2000 7.38; Industry 1985 45.31, 1990 38.69, 1995 36.67, 2000 28.29; Services 1985 43.15, 1990 53.21, 1995 54.32, 2000 64.33.
  - China: Agriculture 1985 28.35, 1990 27.05, 1995 20.51, 2000 15.90; Industry 1985 43.13, 1990 41.61, 1995 48.80, 2000 50.88; Services 1985 28.52, 1990 31.34, 1995 30.69, 2000 33.22.
  - India: Agriculture 1985 33.72, 1990 31.27, 1995 28.24, 2000 24.90; Industry 1985 26.40, 1990 27.64, 1995 28.12, 2000 26.92; Services 1985 39.88, 1990 41.10, 1995 43.64, 2000 48.18.
- Conclusion: small taxpayers—especially in services—must be assimilated into overall tax administration rather than assigned permanent secondary or minimalist regimes.

### The small taxpayer: problem statement and empirical observations
- Historical shift in perception: from marginal and habitual evaders (1950s–1970s) to engines of growth (from early 1980s), especially as services expand.
- High compliance costs for small taxpayers are attributed to complex tax structures and scarce tax administration resources allocated to them; these factors can lead to avoidance or evasion behavior.
- Developed-country studies show mixed evidence on differentiation needs:
  - New Zealand GST study (Ritchie, 2001): “Businesses with computerized accounting systems report a very minimal amount of time spent on end-of-year tax activities” and monthly/twice-monthly PAYE reduced time burdens.
  - Australian GST study (Pope and Rametse, 2001): start-up costs ~ A$ 3,000 and 70 hours per small business; compliance costs remain higher for small businesses (2 percent of a turnover of say A$100,000) than for larger businesses (0.04 percent of a turnover of say A$2 million).
- Two main conclusions from recent studies:
  - Small taxpayers tend to receive less administrative attention while governments may expect them to serve as unpaid tax collectors through PAYG systems.
  - Administrative resources are geared to medium and large taxpayers with higher expected yield; this tendency is likely amplified in developing countries with scarce resources.
- Policy implication: scale up quality and focus of administrative resources for small taxpayers to enable graduation to general tax treatment.

### Constructing the small taxpayer: definitions and issues
- Key questions for “single tax” or special regimes:
  1. Which taxes to include (income tax, consumption tax, excise tax, social security tax)?
  2. Where to draw dividing line between small and next category?
  3. Does a single tax reduce evasion?
  4. Are there better alternatives within the regular tax structure?
- The concept of a single tax lacks strong economic basis; treating each tax separately is more logical.
  - Social security contributions should not be mixed into a single tax because they alter employer/employee incentives and long-run social security balances.
  - For income tax the small taxpayer could be subject to a minimum tax; for VAT a threshold with voluntary opt-in is preferable.
- Separating small taxpayers:
  - Cutoffs are often pragmatic and politically influenced; gross turnover is commonly used as a compromise though it may lack economic relevance.
  - Demarcation incentives:
    - Clustering below thresholds and fragmentation within business families to avoid thresholds.
    - Example audit targeting: about 5 percent of taxpayers targeted annually, implying a probability of being audited every twenty years; small taxpayers almost never get audited under typical frameworks.
    - These incentives distort resource allocation and reduce production efficiency (cited simulation evidence by Keen and Mintz, 2004).
- Single-tax regimes have often yielded little revenue and not meaningfully reduced evasion (experiences in Argentina and India):
  - Argentina monotributo: preliminary reports indicated less than 5 percent of participants were new registrants; impact on revenue marginal—1.4 percent of total revenue in 2000, declining to 0.9 percent of total revenue in 2002 (Salim, 2002).
  - India’s simplified scheme (1400 Levy) was discontinued in 1997 amid mistrust and apathy; it did not generate confidence among target taxpayers.
- Recommended reporting and progression metrics when size-based regimes exist:
  - Annual reporting on increase in taxpayer register/roll below the threshold.
  - Trend in relative allocation of administrative resources between small, medium and large taxpayer units.
  - Annual calculation of decrease in revenue loss as taxpayers graduate above the small threshold.
  - Progressive lowering of thresholds as part of tax system development.

### Tax simplification and administrative design
- Simplification of tax statutes reduces compliance costs (examples: multiple VAT rates/exemptions and rapidly changing VAT regulations increase costs).
  - Klun (2003): rapid changes in VAT regulations during 2000-01 in Slovenia raised compliance costs.
  - Steuerle (1999) for the United States: reduce complexity via organization, improved information, and fewer forms.
  - Bardsley (1995) for Australia: simplification should lead to expansion at the smaller end and contraction at the larger end of the small business sector.
- Even if short- to medium-term small taxpayer separation persists, targeting should ensure balance in administration consistent with original tax policy intentions.

### Appropriate taxation of small taxpayers — income tax
- Three taxes relevant to small/micro businesses: income tax, VAT, social security tax. Design substitutes to correspond closely to main tax structure and report graduations to the regular system.
- Income tax for small businesses:
  - Best method: minimum alternate tax (MAT).
  - MAT bases used internationally: gross assets, book profits, turnover, net worth; Latin America examples include gross assets-based MAT (Argentina, Ecuador, Mexico, Peru); net worth-based MAT used in Colombia and India (but susceptible to base erosion).
  - Gross assets-based MAT minimizes manipulation and improves economic efficiency.
  - Turnover-based MAT used in some African countries where turnover is easily measurable.
  - For small businesses, recommend MAT based on combination: gross assets and turnover, whichever is greater, to cover manufacturing (asset-intensive) and services (turnover-intensive).
- MAT mechanics and efficiency example:
  - Example: business income tax rate 35 percent; average rate of return on gross assets 5 percent → MAT = 1.75 percent (35 X .05).
  - Allow ten or fifteen year loss carry forward and backward to smooth burden (Mexico example).
- Alternatives:
  - Cash-flow type tax used in Mexico for small agricultural sector: simple but yields low revenue and grants immediate full depreciation, narrowing base and requiring a higher rate for revenue adequacy.
- Recommendation: implement MAT-like arrangement based on gross assets and turnover (whichever yields higher) with regular reporting on graduations to full income tax filing; MAT continues to apply thereafter.

### Appropriate taxation of small taxpayers — VAT
- Suitable VAT regime: place small businesses below a threshold with voluntary opt-in and require regular reporting on:
  1. Businesses remaining under threshold for many years with rationalization.
  2. Rate of change in taxpayer registers, especially the small taxpayer register, with explanations.
- Do not club small VAT payers with income tax liabilities.
- Factors leading to low VAT yields:
  1. A high VAT threshold.
  2. Undercoverage of services in the VAT base.
  3. Hiding by medium-sized enterprises under the threshold.
- Example of adverse market mechanics: secondary market for VAT invoices where small taxpayers (below threshold) are suppliers of invoices sold to large VAT payers to claim input tax credits—distorts incidence and encourages evasion.
- Revenue productivity benchmarks:
  - Chile: collects over 8 percent of GDP in VAT revenue with an 18 percent VAT (implying nearly ½ X percent of GDP with an X percent VAT).
  - General empirical range: countries tend to collect between 1/3 X percent and 2/5 X percent of GDP in VAT revenue with an X percent VAT (Shome, 2002).
  - A VAT collection below 1/3 X percent of GDP at rate X typically signifies either excluding many services from the positive list or allowing a very high threshold.
- Policy priorities:
  - Include as many services as possible in the VAT base, preferably via a “negative list” for services rather than taxing services via a restrictive “positive list.”
  - Maintain an ongoing program to move taxpayers progressively from the small category to the regular VAT category.
- Implementation challenges:
  - Strong small business lobbies can resist VAT extension.
  - VAT administrations may devalue extension efforts based on operational difficulty; nonetheless, vigilance and targeted administration are essential given negative ramifications of large sectors remaining below the VAT threshold.

*Source: _pdp02 - conclusion.*

### introduction of a sub-national VAT in 2003 appeared to reflect demonstrations in the nation’s capital by small

### _pdp02 - introduction of a sub-national VAT in 2003 appeared to reflect demonstrations in the nation’s capital by small

### Social Security Tax
- The social security tax can impinge upon small businesses if they are required to perform an administrative withholding function, thereby raising compliance costs for small businesses.  
- Country experiences: Australia and New Zealand have investigated this issue; in several Latin American countries businesses are allowed to use withheld money for a short period (e.g., a week) before transferring it to Government. The VAT in Colombia is cited as an example.  
- Administrations often oppose the private sector’s “free” use of public funds, but this use can be interpreted as compensation for the free administrative service the private sector performs. The critical design element is the length of time between withholding from employees and transfer to Government.  
- The same principle may be applied to social security tax and income tax withholding: small businesses may be allowed to transfer withheld tax after a prescribed period of time.  
- This would permit small businesses to perform important administrative functions for income tax, VAT, and social security tax, provided they are registered and paying regular taxes. Only when registered and regular taxpayers can small businesses be relied upon to perform governmental support functions adequately.

### Concluding Remarks — Major findings
- Large Taxpayer Units (LTUs) have been established in almost all modern tax administrations in developing countries in Latin America and Asia because a small number—anywhere between 1,000 and 50,000—of large taxpayers contribute between 80-90 percent of the tax revenue collected.  
- The revenue stability from the LTU model should be extended to other taxpayers, with special care to expand the taxpayer base and allocate administrative resources to bring small taxpayers into the tax net without unduly high costs to revenue administration. The strategy must include a credible threat of audits for all taxpayers.  
- Concern about sustainability of LTU-introduced reforms: tax administrations may lack an overall reform strategy to extend LTU modernization to medium-size and small taxpayers (Baer and others (2002)). A well-defined strategy to target small taxpayers is needed.  
- Small to medium taxpayers in Asia and Latin America can possess significant revenue contribution potential, possibly a quarter of the total (depending on thresholds). Separation of taxpayers by size and subjecting them to different regimes could distort resource allocation and harm long-run economic growth and revenue potential unless an overall reform strategy is implemented.  
- Structural changes (privatization of large public enterprises and utilities) have expanded self-employment in small-scale services and manufacturing; captive revenue sources have given way to smaller entities with revenue potential, increasing the need to address the growing pool of small taxpayers.  
- “Single tax” (monotributo) regimes that scale back taxation on small taxpayers typically collect less tax than their potential, increasing inequity, discouraging graduation from the regime, and exacerbating tax evasion (including encouraging a secondary market for VAT invoices). Single tax regimes also induce inefficiency by encouraging allocation toward lower-taxed sectors. Tax policy experts generally prefer tax simplification rather than separation by taxpayer size. A clearly defined strategy to phase out a single tax is recommended if it exists.

### Policy recommendations (explicit)
- (i) Income tax: Subject small taxpayers to a Minimum Alternate Tax (MAT) based on both gross assets and turnover, whichever yields higher revenue. The tax rate of MAT should be set to equivalence with the lower marginal income tax rate under the assumption of a reasonable rate of return on capital.  
- (ii) VAT: Establish a threshold below which small taxpayers would function; the threshold should not be inappropriately high. Small taxpayers should be allowed to opt into the general VAT system. VAT administration should regularly report the pace at which small taxpayers are graduating from below the threshold.  
- (iii) Social security tax: Give small taxpayers a reasonable period for utilization of the money they withhold before transferring it to government, as indirect compensation for the free withholding and transfer service they perform for government.  
- (iv) Single tax: Do not enact a single tax covering all taxes—income tax, VAT, social security tax, or other taxes—that small taxpayers are liable to pay.

### Administrative and reporting enhancements recommended
- Regularly report:
  - (i) the increase in taxpayer register/roll below the threshold;  
  - (ii) the trend in the relative allocation of administration resources between small, medium and large taxpayer units; and  
  - (iii) an annual calculation of the decrease in revenue loss as more taxpayers graduate above the threshold.  
- Emphasize tax simplification to ensure tax practices reflect tax policy intentions as expressed in the tax statute.  
- Limit executive orders that create tax arrangements for administrative convenience per se, because while they may facilitate operations short run they can divert the tax system away from principles of efficiency and equity. These principles should remain central to encourage long run economic growth and robust revenue productivity.

*Source: _pdp02 - introduction of a sub-national VAT in 2003 appeared to reflect demonstrations in the nation’s capital by small (IMF PDF).*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/pdp/2004/_pdp02.pdf_