Modelling Value-Added Tax in the Presence of Multiproduction and Differentiated Exemptions
AbstractWe develop a framework for economy-wide modelling of value-added tax systems. Our framework models a number of complexities of VAT systems as they are implemented by tax agencies. In particular, we model multiple rates, multiple exemptions, multiple degrees of refundability across commodity users, and multi-product enterprises. A detailed VAT framework, such as that which we present in this paper, is important for correct modelling of VAT within a general equilibrium model. Such a framework is also of value in correctly calculating the distribution of indirect tax payments in CGE model databases, a prerequisite of accurate welfare impact calculations. We use the model to analyse the effects of simplifying Vietnam's complex VAT system. We simplify the system by moving from three tax rates to one budget-neutral rate, while also removing many discretionary exemptions. We find that the policy lifts real private consumption spending, our welfare measure, by an average of 0.9 per cent over our simulation period, 2008-2018.
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Bibliographic InfoPaper provided by Victoria University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number g-182.
Date of creation: Feb 2009
Date of revision:
Publication status: Published in Journal of Asian Economics, 2010, Vol. 21(2), pp. 156-173.
value added tax; dynamic CGE model; Vietnam; indirect tax reform;
Other versions of this item:
- Giesecke, James A. & Nhi, Tran Hoang, 2010. "Modelling value-added tax in the presence of multi-production and differentiated exemptions," Journal of Asian Economics, Elsevier, vol. 21(2), pages 156-173, April.
- Giesecke, James A. & Tran, Nhi Hoang, 2009. "Modelling value-added tax in the presence of multiproduction and differentiated exemptions," MPRA Paper 13914, University Library of Munich, Germany.
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-25 (All new papers)
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