Tax Administration Reforms in the Caribbean: Challenges, Achievements, and Next Steps
IMF Working Papers, April 4, 2017
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Bibliographic details
- Authors: Stephane Schlotterbeck
- Published: April 4, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475592610.001
Executive summary
- Over the past decade, governments in the Caribbean region have introduced the value-added tax (VAT) to modernize their tax system, rapidly mobilize revenue and reduce budget deficits.
- The paper concludes that while the VAT has boosted revenues, the VAT has not reached its potential.
- Although tax administration reforms can boost revenues, countries have just started to address organizational inefficiencies, data integrity issues, and operational ineffectiveness.
- Reforms need to intensify in order to have a more significant impact on compliance and revenue.
VAT design and performance
- Intended VAT characteristics:
- Broad-based tax with limited exemptions.
- Single rate.
- Zero-rating confined to exports.
- Observed deviations from intended design:
- The VAT’s design in the region often lacks the intended characteristics listed above.
- Impact:
- VAT adoption has boosted revenues, but design and implementation shortcomings have prevented full revenue potential from being realized.
Tax administration reforms: challenges and achievements
- Key challenges identified:
- Organizational inefficiencies within tax administrations.
- Data integrity issues affecting taxpayer records and compliance monitoring.
- Operational ineffectiveness in core tax administration functions.
- Current reform status:
- Countries have begun reforms but progress is limited; initial measures have not yet delivered substantial compliance or revenue gains.
- Implication:
- Intensified and sustained reforms are required for meaningful improvement in compliance and revenue mobilization.
Policy implications and recommended next steps
- Intensify tax administration reforms with focus on:
- Addressing organizational inefficiencies.
- Improving data integrity and management systems.
- Strengthening operational effectiveness across tax administration core functions.
- Align VAT design more closely with intended principles:
- Reduce exemptions and move toward a single-rate structure where appropriate.
- Confine zero-rating policy to exports to preserve the VAT base.
- Prioritize reforms that directly affect compliance and revenue outcomes rather than piecemeal administrative changes.
Source: Tax Administration Reforms in the Caribbean: Challenges, Achievements, and Next Steps (IMF Working Paper).