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The value-added tax is the Achilles heel of state revenue in Europe

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  • Gernot Mittler

Abstract

In his introductory presentation the Minister of Finance of Rheinland-Pfalz, Gernot Mittler, stressed that the widespread opinion at the introduction of the current value-added tax system that the new system was simple, practical and self-regulating has proved to be wrong, unfortunately. The system is, in fact, extremely fraud prone. A decoupling of the value-added tax revenue from economic growth has also been observed, with the result of regressive tax revenues in Germany since 2001. In light of the importance of the value-added tax as a main source of revenue of the German state, this is alarming. Instead of the subsequent adjustments of the system, the inherent sources of fraud must be eliminated via definite system changes (in particular, stopping the prior-tax payment flows in the enterprise segment).

Suggested Citation

  • Gernot Mittler, 2004. "The value-added tax is the Achilles heel of state revenue in Europe," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 57(02), pages 5-9, January.
    • Handle: RePEc:ces:ifosdt:v:57:y:2004:i:02:p:5-9
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    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L00 - Industrial Organization - - General - - - General

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