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The VAT at 100: A Retrospective Survey and Agenda for Future Research

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  • Joel Slemrod
  • Tejaswi Velayudhan

Abstract

We take stock of what is known about the consequences of actual value-added tax (VAT) systems, nearly 100 years since its conception. We benchmark it to the tax it most often replaced—the retail sales tax (RST). We do this not because we advocate a return to the RST, but because it allows us to evaluate the performance of two tax instruments in actual practice instead of comparing them to their idealized versions, which are never achieved. Doing so highlights different areas of focus than traditional comparisons to the “good†VAT. Like the RST, the VAT is weak at the final stage and technological advances that ameliorate VAT issues could also be applied to the RST. VAT introduces new evasion opportunities not possible in an RST such as invoice mills and carousel fraud. We propose new metrics and a research agenda to evaluate the “health†of the real VAT.

Suggested Citation

  • Joel Slemrod & Tejaswi Velayudhan, 2022. "The VAT at 100: A Retrospective Survey and Agenda for Future Research," Public Finance Review, , vol. 50(1), pages 4-32, January.
    • Handle: RePEc:sae:pubfin:v:50:y:2022:i:1:p:4-32
    DOI: 10.1177/10911421221094595
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    References listed on IDEAS

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    Cited by:

    1. Okunogbe,Oyebola Motunrayo & Santoro,Fabrizio, 2022. "Increasing Tax Collection in African Countries : The Role of Information Technology," Policy Research Working Paper Series 10182, The World Bank.

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    More about this item

    Keywords

    value added tax; development; tax administration;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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