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The Value Added Tax and Developing Countries

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  • Shoup, Carl S

Abstract

The comprehensive value added tax (VAT), now a principal source of revenue for some forty countries, was nowhere to be found only thirty years ago. This article analyzes the reasons for this dramatic change and weighs the advantages and disadvantages of the VAT for developing countries. It points out the choices a government instituting a VAT must make with respoect to taxing all final products or only consumer goods, and it offers suggestions on how to treat exports and imports, how to compute the VAT payable, whether to use "exemption" or "zero-rating" approaches, and whether to have one or various tax rates. For countries with a fragmented retail trade the VAT may apply only to wholesale and earlier stages. The article draws no general conclusions on the suitability of the VAT for developing coutnries, because these countries differ so widely. Copyright 1988 by Oxford University Press.

Suggested Citation

  • Shoup, Carl S, 1988. "The Value Added Tax and Developing Countries," The World Bank Research Observer, World Bank, vol. 3(2), pages 139-156, July.
    • Handle: RePEc:oup:wbrobs:v:3:y:1988:i:2:p:139-56
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    1. Care ar fi nivelul optim al TVA? Dar ale “TVA-urilor”?
      by hymerion in dan popa on 2011-04-03 09:21:48

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    Cited by:

    1. Damodar Nepram, 2011. "State-Level Value Added Tax and Its Revenue Implications in India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 5(2), pages 245-265, May.
    2. Takamasa Akiyama & Akihiko Nishio, 1997. "Sulawesi's Cocoa Boom: Lessons of Smallholder Dynamism and a Hands-Off Policy," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 33(2), pages 97-121.
    3. Huihua Nie & Mingyue Fang & Tao Li, 2010. "China’s Value-Added Tax Reform, Firm Behavior and Performance," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 5(3), pages 445-463, September.
    4. Takamasa Akiyama & Akihiko Nishio, 1996. "Indonesia's cocoa boom : hands-off policy encourages smallholder dynamism," Policy Research Working Paper Series 1580, The World Bank.
    5. Jean-François Gautier, 1999. "Les paradoxes de la TVA dans un pays en développement : l'illustration de l'industrie malgache," Revue Tiers Monde, Programme National Persée, vol. 40(157), pages 187-211.

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