IDEAS home Printed from
   My bibliography  Save this article

Aspects of Interjurisdictional Sharing of the Value-Added Tax


  • Howell H. Zee

    (International Monetary Fund)


The sharing of consumption taxes between different levels of government has come to the fore in a number of developing countries in recent years with respect to the VAT. Employing a simple model that abstracts from considerations of equalization transfers and complications of tax competition, this article inquires about the determinants of an optimal arrangement for interjurisdictional sharing of the VAT base and revenue, and derives explicit solutions for the optimal central and local VAT rates, as well as the optimal revenue-sharing ratio between central and local governments on a derivation basis. The central finding is that an optimal VAT sharing arrangement is generally characterized by the simultaneous sharing of the VAT base and of the VAT revenue. The nature of the optimal solutions is shown to depend on the interactions among interjurisdictional differences in population, income, and the level of local government expenditure relative to local tax base.

Suggested Citation

  • Howell H. Zee, 2008. "Aspects of Interjurisdictional Sharing of the Value-Added Tax," Public Finance Review, , vol. 36(2), pages 147-168, March.
  • Handle: RePEc:sae:pubfin:v:36:y:2008:i:2:p:147-168

    Download full text from publisher

    File URL:
    Download Restriction: no


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:36:y:2008:i:2:p:147-168. 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: (SAGE Publications). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.