A New Approach to Taxing Financial Intermediation Services Under a Value Added Tax
AbstractThis paper contains a proposal (referred to as the "modified reverse-charging" approach) to tax financial intermediation services under a VAT. At the heart of the proposal is the application of a reverse charge that shifts the collection of the VAT on deposit interest from depositors to banks, in conjunction with the establishment of a franking mechanism managed by banks that effectively transfers the VAT so collected to borrowers as credits against the VAT on their loan interest on a transaction-by-transaction basis. The proposal is fully compatible with an invoice-credit VAT and is capable of delivering the correct theoretical result at minimal administrative costs.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 04/119.
Date of creation: 01 Jul 2004
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-22 (All new papers)
- NEP-PBE-2005-10-22 (Public Economics)
- NEP-PUB-2005-10-22 (Public Finance)
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.:
- Harry Huizinga, 2002. "A European VAT on financial services?," Economic Policy, CEPR & CES & MSH, vol. 17(35), pages 497-534, October.
- Glenn Jenkins & Rup Khadka, 1998. "Value Added Tax Policy And Implementation In Singapore," Development Discussion Papers 1998-02, JDI Executive Programs.
- Peter Dungan & Jack Mintz & Finn Poschmann & Thomas Wilson, 2008. "Growth Oriented Sales Tax Reform for Ontario: Replacing the Retail Sales Tax with a 7.5 Percent Value-Added Tax," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 273, September.
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