The Value-Added Tax: Its Causes and Consequences
AbstractHas the VAT proved, as its proponents claim, an especially effective form of taxation? To address this, this paper first shows that a tax innovation-such as the introduction of a VAT- reduces the marginal cost of public funds if and only if it also leads an optimizing government to increase the tax ratio. This leads to the estimation, on a large panel, of a system of equations describing the probability of VAT adoption and the revenue impact of the VAT. The sign of the revenue impact is generally ambiguous, but most countries that have adopted a VAT seem to have gained a more effective tax instrument in doing so.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 07/183.
Date of creation: 01 Jul 2007
Date of revision:
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Other versions of this item:
- Michael Keen & Ben Lockwood, 2007. "The Value Added Tax: Its Causes and Consequences," Economics Working Papers ECO2007/09, European University Institute.
- Keen, Michael & Lockwood, Ben, 2007. "The Value Added Tax : Its Causes and Consequences," The Warwick Economics Research Paper Series (TWERPS) 801, University of Warwick, Department of Economics.
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
This paper has been announced in the following NEP Reports:
- NEP-ACC-2007-09-16 (Accounting & Auditing)
- NEP-ALL-2007-09-16 (All new papers)
- NEP-PBE-2007-09-16 (Public Economics)
- NEP-PUB-2007-09-16 (Public Finance)
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