International Vat Harmonization: Economic Effects

IMF Working Papers, February 1, 1991

Source details

Canonical URL

International Vat Harmonization: Economic Effects

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Authors: Jacob A. Frenkel, Steven A. Symansky, Assaf Razin
• Published: February 1, 1991
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451921175.001

Summary

• Authors: Jacob A. Frenkel, Steven A. Symansky, Assaf Razin
• Publication date: February 1, 1991
• Core focus: Highlights key macroeconomic issues related to VAT harmonization and analyzes the effects of changes in the time profile of various taxes on international behavior.
• Main methodological approach: Development of a model emphasizing temporal tax-profile effects and dynamic simulations.

Model and Simulations

• A model is developed which emphasizes the effects of changes in the time profile of various taxes on international behavior.
• Dynamic simulations are used to assess macroeconomic and welfare implications under alternative tax systems and behavioral parameters.

Key Findings

• The macroeconomic and welfare implications of VAT harmonization depend critically on:
  • the tax system, and
  • the degree of substitution governing temporal and intertemporal allocations.
• Conflicts of interest among countries can arise and their nature depends on the structure of the tax system and substitution parameters.
• The effects of revenue-neutral tax conversions between income and consumption tax systems undertaken by a single country depend critically on international differences in behavior.

Policy Implications and Considerations

• VAT harmonization outcomes cannot be evaluated without detailed consideration of:
  • the specific tax system in place, and
  • behavioral responses (substitution elasticities) across time and between countries.
• Revenue-neutral conversions between income and consumption taxes in one country can have materially different international effects depending on cross-country behavioral differences; policymakers should account for international heterogeneity when designing such reforms.

Subject and Keywords (as listed)

• Subject: Cash-flow tax, Consumption, Consumption taxes, Income tax systems, National accounts, Revenue administration, Taxes, Value-added tax
• Keywords: cash flow, Cash-flow tax, Consumption, current account position, discount factor, Europe, Global, harmonization arise, home country VAT, Income tax systems, supply schedule, tax revenue, tax system, terms of trade, Value-added tax, VAT harmonization, VAT HARMONIZATION, VAT system, WP