The value added tax: Its causes and consequences
This paper explores the causes and consequences of the remarkable rise of the value added tax (VAT), asking what has shaped its adoption and, in particular, whether it has proved an especially effective form of taxation. It is first shown 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 panel of 143 countries for 25Â years, of a system describing both the probability of VAT adoption and the revenue impact of the VAT. The results point to a rich set of determinants of VAT adoption, and to a significant but complex impact on the revenue ratio. The estimates suggest, very tentatively, that most countries which have adopted a VAT have thereby gained a more effective tax instrument, though this is less apparent in sub-Saharan Africa.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Bird,Richard & Gendron,Pierre-Pascal, 2011.
"The VAT in Developing and Transitional Countries,"
Cambridge University Press, number 9781107401440, August.
- Bird,Richard & Gendron,Pierre-Pascal, 2007. "The VAT in Developing and Transitional Countries," Cambridge Books, Cambridge University Press, number 9780521877657, August.
- John Thornton & Fabian Bornhorst & Sanjeev Gupta, 2008. "Natural Resource Endowments, Governance, and the Domestic Revenue Effort; Evidence from a Panel of Countries," IMF Working Papers 08/170, International Monetary Fund.
- Emran, M. Shahe & Stiglitz, Joseph E., 2005. "On selective indirect tax reform in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 599-623, April.
- M. Shahe Emran & Joseph E. Stiglitz, 2002. "On Selective Indirect Tax Reform in Developing Countries," International Trade 0210003, EconWPA.
- Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
- Jeremy Edwards & Michael Keen, 1994. "Tax competition and Leviathon," IFS Working Papers W94/07, Institute for Fiscal Studies.
- Besley, Timothy & Smart, Michael, 2007. "Fiscal restraints and voter welfare," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 755-773, April.
- Timothy Besley & Michael Smart, 2005. "Fiscal restraints and voter welfare," LSE Research Online Documents on Economics 3769, London School of Economics and Political Science, LSE Library.
- Timothy Besley & Michael Smart, 2005. "Fiscal Restraints and Voter Welfare," STICERD - Political Economy and Public Policy Paper Series 06, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Sònia Muñoz & Stanley Sang-Wook Cho, 2003. "Social Impact of a Tax Reform; The Case of Ethiopia," IMF Working Papers 03/232, International Monetary Fund.
- 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.
- John Piggott & John Whalley, 1998. "VAT Base Broadening, Self Supply, and The Informal Sector," NBER Working Papers 6349, National Bureau of Economic Research, Inc.
- Joshua Aizenman & Yothin Jinjarak, 2008. "The collection efficiency of the Value Added Tax: Theory and international evidence," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(3), pages 391-410.
- Joshua Aizenman & Yothin Jinjarak, 2005. "The Collection Efficiency of the Value Added Tax: Theory and International Evidence," NBER Working Papers 11539, National Bureau of Economic Research, Inc.
- Aizenman, Joshua & Jinjarak, Yothin, 2005. "The collection efficiency of the value added tax: theory and international evidence," Santa Cruz Department of Economics, Working Paper Series qt42d103zh, Department of Economics, UC Santa Cruz.
- Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
- Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
- Rodrik, Dani, 1996. "Why do More Open Economies Have Bigger Governments?," CEPR Discussion Papers 1388, C.E.P.R. Discussion Papers.
- Besley, Timothy & Jewitt, Ian, 1995. "Uniform taxation and consumer preferences," Journal of Public Economics, Elsevier, vol. 58(1), pages 73-84, September.
- Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
- Keen, Michael & Smith, Stephen, 2006. "VAT Fraud and Evasion: What Do We Know and What Can Be Done?," National Tax Journal, National Tax Association, vol. 59(4), pages 861-887, December.
- Stephen 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.
- Kent Matthews & Jean Lloyd-Williams, 2000. "Have VAT rates reached their limit?: an empirical note," Applied Economics Letters, Taylor & Francis Journals, vol. 7(2), pages 111-115.
- A. Lans Bovenberg, 1987. "Indirect Taxation in Developing Countries: A General Equilibrium Approach," IMF Staff Papers, Palgrave Macmillan, vol. 34(2), pages 333-373, June.
- Ary Lars Bovenberg, 1986. "Indirect Taxation in Developing Countries; A General Equilibrium Approach," IMF Working Papers 86/1, International Monetary Fund.
- Glenn P. Jenkins & Hatice Jenkins & Chun-Yan Kuo, 2006. "Is the Value Added Tax Naturally Progressive?," Working Papers 1059, Queen's University, Department of Economics.
- Alesina, Alberto & Wacziarg, Romain, 1998. "Openness, country size and government," Journal of Public Economics, Elsevier, vol. 69(3), pages 305-321, September.
- Wacziarg, Romain & Alesina, Alberto, 1998. "Openness, Country Size and Government," Scholarly Articles 4553014, Harvard University Department of Economics.
- Keen, Michael & Lockwood, Ben, 2006. "Is the VAT a Money Machine?," National Tax Journal, National Tax Association, vol. 59(4), pages 905-928, December.
- Keen, Michael, 2008. "VAT, tariffs, and withholding: Border taxes and informality in developing countries," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 1892-1906, October.
- Michael Keen, 2007. "VAT, Tariffs, and Withholding; Border Taxes and Informality in Developing Countries," IMF Working Papers 07/174, International Monetary Fund.
- Bovenberg, A.L., 1987. "Indirect taxation in developing countries : A general equilibrium approach," Other publications TiSEM adac046e-0845-4c4e-904a-5, Tilburg University, School of Economics and Management.
- Agha, Ali & Haughton, Jonathan, 1996. "Designing VAT Systems: Some Efficiency Considerations," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 303-308, May.
- Kent Matthews, 2003. "VAT Evasion and VAT Avoidance: Is there a European Laffer curve for VAT?," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(1), pages 105-114. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:92:y:2010:i:2:p:138-151. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.