A General Framework for Measuring VAT Compliance Rates
AbstractSummary measures of VAT compliance rates are valuable for identifying problem areas in VAT implementation. They are also essential for meaningful cross-country and cross-time comparisons of VAT compliance. We present a comprehensive and general framework for calculating VAT compliance rates at both the economy-wide and detailed sectoral levels. Unlike existing measures of VAT compliance, our framework isolates a compliance measure from the effects on VAT receipts of detailed features of VAT systems as actually implemented by tax authorities. These features include multiple VAT rates, exemptions, registration rates, refund limitations, informal activity, taxation of domestic non-residents, and undeclared imports. We implement our comprehensive VAT compliance measure for Vietnam, a country with a complex VAT system. Our estimate of Vietnam's VAT compliance rate is about eleven percentage points higher than that calculated by the most popular measure of compliance, collection efficiency (CE). Our method facilitates decomposition of the difference between CE and our VAT compliance measure into the individual contributions of statutory and structural features of Vietnam's VAT regime.
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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-206.
Date of creation: Aug 2010
Date of revision:
Publication status: Published in Applied Economics, Vol. 44(15), May 2012, pp. 1867-1889.
VAT; collection efficiency; revenue ratio; compliance rate;
Other versions of this item:
- James Giesecke & Nhi Hoang Tran, 2012. "A general framework for measuring VAT compliance rates," Applied Economics, Taylor & Francis Journals, vol. 44(15), pages 1867-1889, May.
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-PBE-2010-09-25 (Public Economics)
- NEP-SEA-2010-09-25 (South East Asia)
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.:
- Luiz de Mello, 2008. "Avoiding the Value Added Tax: Theory and Cross-Country Evidence," OECD Economics Department Working Papers 604, OECD Publishing.
- Luca Barbone & Misha V. Belkindas & Leon Bettendorf & Richard Bird & Mikhail Bonch-Osmolovskiy & Michael Smart, 2013. "Study to quantify and analyse the VAT Gap in the EU-27 Member States," CASE Network Reports 0116, CASE-Center for Social and Economic Research.
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