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The VAT Paradox in Resource Dependent Economies

Author

Listed:
  • Rabah Arezki
  • Frederick van der Ploeg
  • Gregoire Rota-Graziosi
  • Văn Đạo Lê
  • Rick van der Ploeg

Abstract

The introduction of the Value Added Tax (VAT) has been widely perceived as a successful instrument, boosting government revenue and stimulating industrialization. However, in countries that are heavily dependent on exports of natural resources the introduction of the VAT has led on average to lower tax revenues and did not stimulate industrialization. The VAT thus did not help these countries to diversify away from the natural resource sector contrary to its promise. The results indicate a novel channel for the resource curse hinging on the interaction between economic structure and the design of tax systems.

Suggested Citation

  • Rabah Arezki & Frederick van der Ploeg & Gregoire Rota-Graziosi & Văn Đạo Lê & Rick van der Ploeg, 2025. "The VAT Paradox in Resource Dependent Economies," CESifo Working Paper Series 11967, CESifo.
    • Handle: RePEc:ces:ceswps:_11967
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    File URL: https://www.ifo.de/DocDL/cesifo1_wp11967.pdf
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    More about this item

    Keywords

    natural resource; tax; industrialization; value added tax;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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