{
  "title": "The Value-Added Tax: Its Causes and Consequences",
  "publication": "IMF Working Papers, July 1, 2007",
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  "summary": "Has the VAT proved, as its proponents claim, an especially effective form of taxation? To address this, this paper first shows that a tax innovation-such as the introduction of a VAT- reduces the marginal cost of public funds if and only if it also leads an optimizing government to increase the tax",
  "sections": [
    {
      "heading": "Key findings",
      "content": "- A tax innovation—such as the introduction of a VAT—reduces the marginal cost of public funds if and only if it also leads an optimizing government to increase the tax ratio.\n- The sign of the revenue impact of a VAT is generally ambiguous in the estimates.\n- Despite ambiguity, most countries that have adopted a VAT \"seem to have gained a more effective tax instrument in doing so.\""
    },
    {
      "heading": "Methodology and empirical approach",
      "content": "- The paper estimates, on a large panel, a system of equations describing:\n  - the probability of VAT adoption, and\n  - the revenue impact of the VAT.\n- The analysis links the adoption decision to subsequent changes in the tax ratio under an optimizing government framework."
    },
    {
      "heading": "Subjects and analytical focus",
      "content": "- Subject: Personal income, Revenue administration, Tariffs, Tax efficiency, Value-added tax\n- Keywords: dependent variable, open economy, revenue equation, VAT adoption, VAT dummy, WP"
    },
    {
      "heading": "Policy implications",
      "content": "- Introducing a VAT can make taxation more efficient, but efficiency gains materialize only if the government responds by increasing the tax ratio.\n- Policymakers considering VAT adoption should account for the conditions under which adoption will induce an optimizing government to adjust the overall tax mix.\n\nBen Lockwood and Michael Keen, July 1, 2007.\n\n---\n\n Content in this bundle\n\n- wp07183\n  - wp07183 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp07183 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-value-added-tax-its-causes-and-consequences-21121"
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    "Authors: Ben Lockwood, Michael Keen",
    "Published: July 1, 2007",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451867473.001",
    "A tax innovation—such as the introduction of a VAT—reduces the marginal cost of public funds if and only if it also leads an optimizing government to increase the tax ratio.",
    "The sign of the revenue impact of a VAT is generally ambiguous in the estimates.",
    "Despite ambiguity, most countries that have adopted a VAT \"seem to have gained a more effective tax instrument in doing so.\"",
    "The paper estimates, on a large panel, a system of equations describing:",
    "The analysis links the adoption decision to subsequent changes in the tax ratio under an optimizing government framework.",
    "Subject: Personal income, Revenue administration, Tariffs, Tax efficiency, Value-added tax",
    "Keywords: dependent variable, open economy, revenue equation, VAT adoption, VAT dummy, WP",
    "Introducing a VAT can make taxation more efficient, but efficiency gains materialize only if the government responds by increasing the tax ratio.",
    "Policymakers considering VAT adoption should account for the conditions under which adoption will induce an optimizing government to adjust the overall tax mix.",
    "**_wp07183**"
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