Estimating the Base of the Value-Added Tax (VAT) in Developing Countries : The Problem of Exemptions

Author/Editor:

George A Mackenzie

Publication Date:

February 1, 1991

Electronic Access:

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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:

Developing countries with VATs typically exempt a large number of goods and services. Following a brief discussion of the rationale for exemptions, this paper presents a formula for the base of a VAT with exemptions. Two basic adjustments must be made to the base without exemptions: subtraction of the value of sales to consumers of exempt industries and addition of intermediate sales of taxable inputs to exempt industries. The paper concludes with a derivation of the elasticity of a VAT with exemptions with respect to aggregate consumption and a discussion of the implications of technological change for the VAT base.

Series:

Working Paper No. 91/21

English

Publication Date:

February 1, 1991

ISBN/ISSN:

9781451921465/1018-5941

Stock No:

WPIEA0211991

Format:

Paper

Pages:

18

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