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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
Date of revision:
Handle: RePEc:imf:imfwpa:07/142

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Keywords: Value added tax; Indirect taxation; Tax reforms;

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References

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  1. M. Shahe Emran & Joseph E. Stiglitz, 2002. "On Selective Indirect Tax Reform in Developing Countries," International Trade 0210003, EconWPA.
  2. Besley, Timothy & Smart, Michael, 2007. "Fiscal restraints and voter welfare," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 755-773, April.
  3. James E. Anderson, 1997. "Trade Reform with a Government Budget Constraint," Boston College Working Papers in Economics 348., Boston College Department of Economics.
  4. John Piggott & John Whalley, 2001. "VAT Base Broadening, Self Supply, and the Informal Sector," American Economic Review, American Economic Association, vol. 91(4), pages 1084-1094, September.
  5. Hatzipanayotou, Panos & Michael, Michael S. & Miller, Stephen M., 1994. "Win-win indirect tax reform : A modest proposal," Economics Letters, Elsevier, vol. 44(1-2), pages 147-151.
  6. Ben Lockwood & Michael Keen, 2007. "The Value-Added Tax: Its Causes and Consequences," IMF Working Papers 07/183, International Monetary Fund.
  7. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 563-577, October.
  8. 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, vol. 5(2), pages 30-34, October.
  9. Knud Munk, 2008. "Tax-tariff reform with costs of tax administration," International Tax and Public Finance, Springer, vol. 15(6), pages 647-667, December.
  10. Newbery, David M., 1986. "On the desirability of input taxes," Economics Letters, Elsevier, vol. 20(3), pages 267-270.
  11. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
  12. Michael Keen & Johanna Elisabeth Ligthart, 1999. "Coordinating Tariff Reduction and Domestic Tax Reform," IMF Working Papers 99/93, International Monetary Fund.
  13. Michael Keen, 2007. "VAT, Tariffs, and Withholding: Border Taxes and Informality in Developing Countries," IMF Working Papers 07/174, International Monetary Fund.
  14. Stephen C. Smith & Michael Keen, 2007. "VAT Fraud and Evasion: What Do We Know, and What Can be Done?," IMF Working Papers 07/31, International Monetary Fund.
  15. Graham Harrison & Russell Krelove, 2005. "VAT Refunds: A Review of Country Experience," IMF Working Papers 05/218, International Monetary Fund.
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Citations

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Cited by:
  1. Gbewopo Attila & Gérard Chambas & Jean-Louis Combes, 2011. "Aide publique au développement et transition fiscale," Working Papers halshs-00554343, HAL.
  2. Helmut M. Dietl & Christian Jaag & Markus Lang & Urs W.O. Trinkner, 2011. "Competition and Welfare Effects of VAT Exemptions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 19.
  3. Emanuele, Canegrati, 2007. "A Contribution to the Positive Theory of Direct Taxation," MPRA Paper 6117, University Library of Munich, Germany.
  4. Richard M. Bird, 2008. "Tax Challenges Facing Developing Countries," Working Papers id:1618, eSocialSciences.

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