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VAT Attacks!

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  • Michael Keen

Abstract

Like the theory of the second best that the 2006 congress marks, the VAT is now fifty years old. Judged by the extent and speed of its spread around the world, and the revenue that it raises, the VAT would seem to have been a remarkable success. Over the last few years, however, it has come under a series of attacks. This paper considers three of the most prominent of these. One is the fear (raised mainly in the United States) that the VAT actually does too good a job of raising tax revenue. The second is the view that the VAT does a bad job of taxing the informal sector-and that tariffs might be a better revenue-raising instrument for many developing countries. The third attack is the most literal, by criminals rather than theorists: in the European Union and elsewhere, sophisticated VAT fraud, targeting its refund provisions, has become a serious concern.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/142.

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Length: 21
Date of creation: 01 Jun 2007
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Handle: RePEc:imf:imfwpa:07/142

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Keywords: Value added tax; Indirect taxation; Tax reforms; vat; tax instrument; tax reform; tax instruments; sales tax; indirect tax; tax system; vat revenue; retail sales tax; national tax journal; consumption tax; tax journal; tax design; tax analysis; tax structures; personal income tax; substitution effect; international tax; optimal tax; tax liability; vat system; taxing powers; tax identification number; uniform tax; press; tax administration; tax systems; domestic tax reform; form of taxation; single tax instrument; domestic taxation; national tax administration; tax evasion; tax revenues; trade taxes; vat receipts; optimal taxation; vat rate; commodity taxation; value added taxes; border taxes; domestic tax; input taxes; tax collections; tariff reform; tax effort; input taxation; efficient tax system; income effect; regressive tax;

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References

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  1. Keen, Michael & Smith, Stephen, 2006. "VAT Fraud and Evasion: What Do We Know and What Can Be Done?," National Tax Journal, National Tax Association, vol. 59(4), pages 861-87, December.
  2. Timothy Besley & Michael Smart, 2005. "Fiscal Restraints and Voter Welfare," STICERD - Political Economy and Public Policy Paper Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE 06, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Michael Keen & Thomas Baunsgaard, 2005. "Tax Revenue and (or?) Trade Liberalization," IMF Working Papers 05/112, International Monetary Fund.
  4. James E. Anderson, 1997. "Trade Reform with a Government Budget Constraint," Boston College Working Papers in Economics, Boston College Department of Economics 348., Boston College Department of Economics.
  5. M. Shahe Emran & Joseph E. Stiglitz, 2002. "On Selective Indirect Tax Reform in Developing Countries," International Trade, EconWPA 0210003, EconWPA.
  6. Michael Keen & Johanna Elisabeth Ligthart, 1999. "Coordinating Tariff Reduction and Domestic Tax Reform," IMF Working Papers 99/93, International Monetary Fund.
  7. Keen, Michael & Lockwood, Ben, 2007. "The Value Added Tax : Its Causes and Consequences," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 801, University of Warwick, Department of Economics.
  8. Hatzipanayotou, Panos & Michael, Michael S. & Miller, Stephen M., 1994. "Win-win indirect tax reform : A modest proposal," Economics Letters, Elsevier, Elsevier, vol. 44(1-2), pages 147-151.
  9. Michael Keen, 2007. "VAT, Tariffs, and withholding," IMF Working Papers 07/174, International Monetary Fund.
  10. Hans-Werner Sinn & Andrea Gebauer & Rüdiger Parsche, 2004. "The Ifo Institute’s Model for Reducing VAT Fraud: Payment First, Refund Later," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 5(2), pages 30-34, October.
  11. Knud Jørgen Munk, 2005. "Tax-tariff reform with costs of tax administration," Economics Working Papers, School of Economics and Management, University of Aarhus 2005-21, School of Economics and Management, University of Aarhus.
  12. John Piggott & John Whalley, 2001. "VAT Base Broadening, Self Supply, and the Informal Sector," American Economic Review, American Economic Association, American Economic Association, vol. 91(4), pages 1084-1094, September.
  13. Newbery, David M., 1986. "On the desirability of input taxes," Economics Letters, Elsevier, Elsevier, vol. 20(3), pages 267-270.
  14. Graham Harrison & Russell Krelove, 2005. "VAT Refunds," IMF Working Papers 05/218, International Monetary Fund.
  15. Stephen C. Smith & Michael Keen, 2007. "VAT Fraud and Evasion," IMF Working Papers 07/31, International Monetary Fund.
  16. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 21(1), pages 25-48, Winter.
  17. Ben Lockwood & Michael Keen, 2007. "The Value-Added Tax," IMF Working Papers 07/183, International Monetary Fund.
  18. Keen, Michael & Lockwood, Ben, 2006. "Is the VAT a Money Machine?," National Tax Journal, National Tax Association, vol. 59(4), pages 905-28, December.
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Cited by:
  1. Helmut Dietl & Christian Jaag & Markus Lang & Urs Trinkner, 2010. "Competition and Welfare Effects of VAT Exemptions," Working Papers, University of Zurich, Institute for Strategy and Business Economics (ISU) 0133, University of Zurich, Institute for Strategy and Business Economics (ISU).
  2. Richard Bird, 2008. "Tax Challenges Facing Developing Countries," Working Papers Series, Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto 12, Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto, revised Mar 2008.
  3. Céline de Quatrebarbes & Savard Luc & Boccanfuso Dorothée, 2011. "Can the suppression of VAT exemption support the poor? The case of Niger," EcoMod2011 3227, EcoMod.
  4. Gbewopo Attila & Gérard Chambas & Jean-Louis Combes, 2011. "Aide publique au développement et transition fiscale," Working Papers, HAL halshs-00554343, HAL.
  5. Moore, Mick, 2014. "Revenue Reform and Statebuilding in Anglophone Africa," World Development, Elsevier, Elsevier, vol. 60(C), pages 99-112.
  6. European Commission, 2012. "Tax reforms in EU Member States - Tax policy challenges for economic growth and fiscal sustainability – 2012 Report," Taxation Papers, Directorate General Taxation and Customs Union, European Commission 34, Directorate General Taxation and Customs Union, European Commission.
  7. Emanuele, Canegrati, 2007. "A Contribution to the Positive Theory of Direct Taxation," MPRA Paper 6117, University Library of Munich, Germany.

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