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VAT in the Public Sector and Exemptions in the Public Interest

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  • Copenhagen Economics
  • KPMG
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    Abstract

    The European Commission has asked Copenhagen Economics and KPMG AG in collaboration to study the VAT rules applied to the public sector in EU member states, and make a comparison with the VAT/GST rules applied in key OECD countries outside the EU.The study collects and analyses relevant studies already carried out at international, EU or national level. The study describes the problems that arise from current VAT rules applied in the public sector. We analyse what the drivers and underlying causes of such problems are. We investigate the impact from differential VAT treatment between public and private entities on the input side in public entities and on the output side where competition between private sector entities and public sector entities are distorted. We have not looked at the postal sector in this study, however, because of the existing Commission proposal. Having identified problems and causes, we present main policy options, which has been defined in co-operation with the Commission services. These options are analysed and quantified using among others, a computable general equilibrium (CGE) model of the EU-economy. Discussions of costs of compliance are included in the analysis. In our economic model, we specifically model the so-called ‘core’ services waste disposal, cultural services, education, hospital services and broadcasting in agreement with the EU Commission. Hence, the modelling scenarios produce changes in output in these public activities which make up the results regarding the changes in public sector output. In order to model the quantitative effects from the policy options we needed to asses the baseline scenario as precisely as possible. To do this, we constructed a legal and an economic questionnaire and submitted them to our network in the majority of Member States.

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    File URL: http://ec.europa.eu/taxation_customs/resources/documents/common/publications/studies/vat_public_sector.pdf
    File Function: final version, 2011
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    Bibliographic Info

    Paper provided by Directorate General Taxation and Customs Union, European Commission in its series Taxation Studies with number 0037.

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    Length: 196 pages
    Date of creation: Mar 2011
    Date of revision:
    Handle: RePEc:tax:taxstu:0037

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    Web page: http://ec.europa.eu/taxation_customs/index_en.htm
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    Related research

    Keywords: European Union; taxation; VAT; Public Sector;

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    References

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    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.:
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    1. Henry Ohlsson, 2003. "Ownership and Production Costs: Choosing between Public Production and Contracting-Out in the Case of Swedish Refuse Collection," Fiscal Studies, Institute for Fiscal Studies, vol. 24(4), pages 451-476, December.
    2. David N. Laband & Bernard F. Lentz, 2003. "New Estimates of Economies of Scale and Scope in Higher Education," Southern Economic Journal, Southern Economic Association, vol. 70(1), pages 172-183, July.
    3. Erkel-Rousse, H. & Mirza, D., 2000. "Import Price-Elasticities : Reconsidering the Evidence," Papiers d'Economie Mathématique et Applications 2000.52, Université Panthéon-Sorbonne (Paris 1).
    4. Browning, Martin, 1993. "Estimating micro parameters from macro data alone: some pessimistic evidence," Ricerche Economiche, Elsevier, vol. 47(3), pages 253-267, September.
    5. Germà Bel & Xavier Fageda, 2006. "Factors explaining local privatization: A meta-regression analysis," Working Papers CREAP2006-03, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2006.
    6. Geroski, P A, 1990. "Innovation, Technological Opportunity, and Market Structure," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 586-602, July.
    7. Stevens, Barbara J, 1978. "Scale, Market Structure, and the Cost of Refuse Collection," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 438-48, August.
    8. Ferris, Michael C. & Munson, Todd S., 2000. "Complementarity problems in GAMS and the PATH solver," Journal of Economic Dynamics and Control, Elsevier, vol. 24(2), pages 165-188, February.
    9. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
    10. Eoin Reeves & Michael Barrow, 2000. "The Impact of Contracting Out on the Costs of Refuse Collection Services - The Case of Ireland," The Economic and Social Review, Economic and Social Studies, vol. 31(2), pages 129-150.
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    Cited by:
    1. European Commission, 2012. "Tax reforms in EU Member States - Tax policy challenges for economic growth and fiscal sustainability – 2012 Report," Taxation Papers 34, Directorate General Taxation and Customs Union, European Commission.

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