{
  "title": "Value-Added Tax Continues to Expand",
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  "summary": "More countries are adopting the VAT, and its contribution to global revenue is rising",
  "sections": [
    {
      "heading": "Overview",
      "content": "- More countries are adopting the VAT, and its contribution to global revenue is rising.\n- Publication: F&D Magazine, March 2022.\n- Authors: RUUD DE MOOIJ, ARTUR SWISTAK.\n- Opinions expressed are those of the authors; they do not necessarily reflect IMF policy."
    },
    {
      "heading": "How VAT Works",
      "content": "- VAT applies to transactions across the supply chain, not only sales to final consumers, and uses a crediting mechanism to avoid cascading taxes.\n- Example with a 20 percent VAT:\n  - Retail sale price inclusive of VAT: $1.50.\n  - Price net of VAT: $1.25.\n  - VAT charged by the grocery store: $0.25 (20 percent of $1.25).\n  - Store purchase net price from factory: $1.00.\n  - Store pays factory: $1.20, including $0.20 VAT.\n  - Store credits $0.20 input VAT against collected VAT and remits $0.05 to the tax authority.\n  - The state ultimately receives $0.25 from the yogurt sale, collected sequentially along the supply chain.\n- VAT is imposed on a destination basis: imports included in the VAT base; exports excluded by applying a zero rate on exports.\n- The credit-invoice mechanism creates a need for tax administrations to provide refunds, especially to exporting businesses with significant input tax credits; nonpayment can create cash flow problems and deter investment.\n- VAT fosters voluntary compliance because businesses have an incentive to obtain invoices to claim input VAT credits."
    },
    {
      "heading": "Ideal and Real VATs",
      "content": "- Textbook (ideal) VAT characteristics:\n  - Broad base comprising all final consumption.\n  - Single rate of tax, usually between 15 and 20 percent.\n  - Minimizes incentives to shift consumption across goods and services.\n- Limitations of VAT for other objectives:\n  - Exempting food to support poor households can cost significant revenue because richer households also consume food.\n  - Better instruments for redistribution: progressive income taxes and cash transfers.\n  - Behavior regulation (e.g., drinking, smoking, polluting) better served by dedicated excises.\n- Common deviations from ideal VAT:\n  - Reduced rates, exemptions, and special programs are widespread.\n  - Minimum registration thresholds based on turnover are used to exempt micro businesses to simplify administration.\n  - Exemptions and reduced rates undermine revenue objectives directly and indirectly by increasing collection costs and facilitating fraud.\n  - Reforms eliminating VAT concessions often meet fierce resistance from powerful lobby groups."
    },
    {
      "heading": "Emerging Challenges and the Next VAT",
      "content": "- Responses to cross-border e-commerce and digital services:\n  - Simplified VAT registration for nonresident vendors.\n  - Online platforms acting as VAT collectors for digital services.\n- Potential future developments:\n  - Blockchain and digital money could provide tax administrations with information about transactions along the full supply chain, potentially removing the need for multistage VATs.\n  - If transaction data can be linked to individuals, consumption taxes could be personalized and compete with personal income tax as an efficient redistributive instrument.\n- Overall assessment:\n  - VAT has withstood globalization, and its revenue share has risen in recent decades."
    },
    {
      "heading": "Key statistics and recent adopters / planned introductions",
      "content": "- More than 160 countries impose VAT.\n- VAT raises, on average, over 30 percent of their total tax take.\n- As a share of GDP, VAT brings in between 4 percent in low-income developing countries and more than 7 percent in advanced economies.\n- Recent adopters include: Angola, Bahrain, Bangladesh, Oman, Saudi Arabia, Suriname, and the United Arab Emirates.\n- Planning to introduce VAT: Bhutan, Kuwait, Liberia, Qatar, and Timor-Leste."
    },
    {
      "heading": "Policy recommendations and implications",
      "content": "- Preserve a broad VAT base and avoid multiple rates and exemptions to maximize revenue and minimize distortions.\n- Use progressive income taxes and cash transfers to support poor households rather than VAT exemptions on basic goods.\n- Use dedicated excises to target behavioral regulation (alcohol, tobacco, emissions) rather than differentiated VAT rates.\n- Improve tax administration capacity to manage refunds, especially for exporters, to avoid cash flow problems and investment deterrence.\n- Leverage digital technologies and platform-based collection to address cross-border e-commerce and digital services taxation.\n- Consider future opportunities from blockchain and digital money for more comprehensive transaction information and potential redesigns of consumption taxation.\n\nValue-Added Tax Continues to Expand, F&D Magazine, March 2022. RUUD DE MOOIJ; ARTUR SWISTAK.\n\n---\n\n Content in this bundle\n\n- عودة إلى الأسس\n  - عودة إلى الأسس (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - عودة إلى الأسس (PDF){rel=\"external\" type=\"application/pdf\"}\n- Back to Basics\n  - Back to Basics (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Back to Basics (PDF){rel=\"external\" type=\"application/pdf\"}\n- La taxe sur la valeur ajoutée continue à se développer\n  - La taxe sur la valeur ajoutée continue à se développer (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - La taxe sur la valeur ajoutée continue à se développer (PDF){rel=\"external\" type=\"application/pdf\"}\n- basics\n  - basics (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - basics (PDF){rel=\"external\" type=\"application/pdf\"}\n- El impuesto al valor agregado continúa su expansión ● Finanzas y Desarrollo ● Marzo de 2022\n  - El impuesto al valor agregado continúa su expansión ● Finanzas y Desarrollo ● Marzo de 2022 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - El impuesto al valor agregado continúa su expansión ● Finanzas y Desarrollo ● Marzo de 2022 (PDF){rel=\"external\" type=\"application/pdf\"}\n- 增值税被不断推广\n  - 增值税被不断推广 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 增值税被不断推广 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2022/03/b2b-value-added-tax-continues-to-expand"
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    "Authors: Ruud de Mooij, ARTUR SWISTAK",
    "Published: March 1, 2022",
    "More countries are adopting the VAT, and its contribution to global revenue is rising.",
    "Publication: F&D Magazine, March 2022.",
    "Authors: RUUD DE MOOIJ, ARTUR SWISTAK.",
    "Opinions expressed are those of the authors; they do not necessarily reflect IMF policy.",
    "VAT applies to transactions across the supply chain, not only sales to final consumers, and uses a crediting mechanism to avoid cascading taxes.",
    "Example with a 20 percent VAT:",
    "VAT is imposed on a destination basis: imports included in the VAT base; exports excluded by applying a zero rate on exports.",
    "The credit-invoice mechanism creates a need for tax administrations to provide refunds, especially to exporting businesses with significant input tax credits; nonpayment can create cash flow problems and deter investment.",
    "VAT fosters voluntary compliance because businesses have an incentive to obtain invoices to claim input VAT credits.",
    "Textbook (ideal) VAT characteristics:",
    "Limitations of VAT for other objectives:",
    "Common deviations from ideal VAT:",
    "Responses to cross-border e-commerce and digital services:",
    "Potential future developments:",
    "Overall assessment:",
    "More than 160 countries impose VAT.",
    "VAT raises, on average, over 30 percent of their total tax take.",
    "As a share of GDP, VAT brings in between 4 percent in low-income developing countries and more than 7 percent in advanced economies.",
    "Recent adopters include: Angola, Bahrain, Bangladesh, Oman, Saudi Arabia, Suriname, and the United Arab Emirates.",
    "Planning to introduce VAT: Bhutan, Kuwait, Liberia, Qatar, and Timor-Leste.",
    "Preserve a broad VAT base and avoid multiple rates and exemptions to maximize revenue and minimize distortions.",
    "Use progressive income taxes and cash transfers to support poor households rather than VAT exemptions on basic goods.",
    "Use dedicated excises to target behavioral regulation (alcohol, tobacco, emissions) rather than differentiated VAT rates.",
    "Improve tax administration capacity to manage refunds, especially for exporters, to avoid cash flow problems and investment deterrence.",
    "Leverage digital technologies and platform-based collection to address cross-border e-commerce and digital services taxation.",
    "Consider future opportunities from blockchain and digital money for more comprehensive transaction information and potential redesigns of consumption taxation.",
    "**عودة إلى الأسس**",
    "**Back to Basics**",
    "**La taxe sur la valeur ajoutée continue à se développer**",
    "**basics**",
    "**El impuesto al valor agregado continúa su expansión ● Finanzas y Desarrollo ● Marzo de 2022**",
    "**增值税被不断推广**"
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