VATs in Federal States: Experiences and Emerging Possibilities
AbstractThe biggest tax story of the last third of the 20 th century was the value-added tax (VAT). From its tentative beginnings in the reform of the French production tax in the early 1950s, by August 2000 some form of VAT existed in at least 123 countries. Few fiscal innovations have been adopted so widely and so quickly. Towards the close of the century, another striking trend was the increasing decentralization of the public sector in many countries around the world. In this process, increasing responsibility for delivering such important and expensive public services as education and health has been devolved to sub-national governments, often to regional governments such as states or provinces. Such decentralization may make good sense in many respects, but experience suggests that it is essential to devolve responsibility not only for expenditures but also for some significant revenues if adequate fiscal accountability is to be maintained.The traditional literature on tax assignment suggests that the best form of taxation for intermediate-level governments is a sales tax. Some form or another of sales tax does in fact constitute the major source of finance for intermediate governments in many countries. Indeed, in developing countries in which income taxes do not play a major role, it is hard to see what other major revenue sources such governments could utilize. The retail sales tax once favored as a regional tax, and still in place in most U.S. states (and some Canadian provinces) is now an aberrationfrom a worldwide perspective. The only good sales tax is now generally considered to be a VAT.There appear to be at least three reasons why the question of sub-national consumption VATs needs to bereconsidered, particularly in federal countries with important regional governments. First, there are few other major revenue options open to countries in which, for whatever reason, substantial expenditure responsibilities have been shifted to lower levels of government, if those governments are to behave in a fiscally responsible manner. Second, sub-national VATs have now in fact been successfully operating in Canada for a decade and have also existed, if to less general acclaim, in Brazil for over 30 years. Finally, several novel proposals have recently been made to overcome certain problems that some see with applying the system used in Canada to other countries in which tax administration is less well developed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0104.
Length: 45 pages
Date of creation: 01 Apr 2001
Date of revision:
Contact details of provider:
Web page: http://aysps.gsu.edu/isp/index.html
VATs; Emerging Possibilities;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Victoria P. Summers & Katherine Baer & Emil M. Sunley, 1996. "A Destination VAT for CIS Trade," IMF Working Papers 96/35, International Monetary Fund.
- Lockwood, Ben & Meza, David & de Myles, Gareth D, 1994. " The Equivalence between Destination and Non-reciprocal Restricted Origin Tax Regimes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(3), pages 311-28.
- Michael Keen, 2000. "VIVAT, CVAT, and All That - New Forms of Value-Added Tax for Federal Systems," IMF Working Papers 00/83, International Monetary Fund.
- Shome, Parthasarathi & Spahn, Paul Bernd, 1996. "Brazil: Fiscal federalism and value added tax reform," Working Papers 96/11, National Institute of Public Finance and Policy.
- Richard Bird & Pierre-Pascal Gendron, 2000. "CVAT, VIVAT, and Dual VAT: Vertical ``Sharing'' and Interstate Trade," International Tax and Public Finance, Springer, vol. 7(6), pages 753-761, December.
- Robin Burgess & Stephen Howes & Nicholas Stern, 1995. "Value-added tax options for India," International Tax and Public Finance, Springer, vol. 2(1), pages 109-141, February.
- Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, vol. 46(2), pages 207-27, June Cita.
- McLure, Charles E. Jr., 1997. "Electronic Commerce, State Sales Taxation, and Intergovernmental Fiscal Relations," National Tax Journal, National Tax Association, vol. 50(4), pages 731-49, December .
- Lockwood, Ben, 1993.
"Commodity tax competition under destination and origin principles,"
Journal of Public Economics,
Elsevier, vol. 52(2), pages 141-162, September.
- Lockwood, Ben, 1992. "Commodity Tax Competition Under Destination and Origin Principles," CEPR Discussion Papers 733, C.E.P.R. Discussion Papers.
- Genser, Bernd, 1996. " A Generalized Equivalence Property of Mixed International VAT Regimes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(2), pages 253-62, June.
- Ben Lockwood & David de Meza & Gareth Myles, 1995. "On the European Union VAT proposals: the superiority of origin over destination taxation," Fiscal Studies, Institute for Fiscal Studies, vol. 16(1), pages 1-17, February.
- Richard Bird & Pierre Gendron, 1998. "Dual VATs and Cross-Border Trade: Two Problems, One Solution?," International Tax and Public Finance, Springer, vol. 5(3), pages 429-442, July.
- Miguel-Angel Lopez-Garcia, 1996. "The origin principle and the welfare gains from indirect tax harmonization," International Tax and Public Finance, Springer, vol. 3(1), pages 83-93, January.
- A. Bovenberg, 1994. "Destination- and origin-based taxation under international capital mobility," International Tax and Public Finance, Springer, vol. 1(3), pages 247-273, October.
- Smith, S., 1997. "The definitive regime for VAT," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Benson).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.