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Estimating the Base of the Value-Added Tax (VAT) in Developing Countries


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  • G. A. Mackenzie


Developing countries with VATs typically exempt a large number of goods and services. Following a brief discussion of the rationale for exemptions, this paper presents a formula for the base of a VAT with exemptions. Two basic adjustments must be made to the base without exemptions: subtraction of the value of sales to consumers of exempt industries and addition of intermediate sales of taxable inputs to exempt industries. The paper concludes with a derivation of the elasticity of a VAT with exemptions with respect to aggregate consumption and a discussion of the implications of technological change for the VAT base.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 91/21.

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Length: 18
Date of creation: 01 Feb 1991
Date of revision:
Handle: RePEc:imf:imfwpa:91/21

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Postal: International Monetary Fund, Washington, DC USA
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Cited by:
  1. Anthony J. Pellechio & Catharine Hill, 1996. "Equivalence of the Production and Consumption Methods of Calcuting the Value-Added Tax Base," IMF Working Papers 96/67, International Monetary Fund.


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