## International Vat Harmonization: Economic Effects

_IMF Working Papers, February 1, 1991_

## Source details

**Canonical URL:** [International Vat Harmonization: Economic Effects](https://www.imf.org/en/publications/wp/issues/2016/12/30/international-vat-harmonization-economic-effects-898)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/30/international-vat-harmonization-economic-effects-898/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/30/international-vat-harmonization-economic-effects-898/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/30/international-vat-harmonization-economic-effects-898/bundle-manifest.json)

## 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

---


_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/international-vat-harmonization-economic-effects-898_