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VAT Attacks!

  • Michael Keen

Like the theory of the second best that the 2006 congress marks, the VAT is now fifty years old. Judged by the extent and speed of its spread around the world, and the revenue that it raises, the VAT would seem to have been a remarkable success. Over the last few years, however, it has come under a series of attacks. This paper considers three of the most prominent of these. One is the fear (raised mainly in the United States) that the VAT actually does too good a job of raising tax revenue. The second is the view that the VAT does a bad job of taxing the informal sector-and that tariffs might be a better revenue-raising instrument for many developing countries. The third attack is the most literal, by criminals rather than theorists: in the European Union and elsewhere, sophisticated VAT fraud, targeting its refund provisions, has become a serious concern.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/142.

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Length: 21
Date of creation: 01 Jun 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/142
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  1. Michael Keen, 2007. "VAT, Tariffs, and withholding; Border Taxes and Informality in Developing Countries," IMF Working Papers 07/174, International Monetary Fund.
  2. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
  3. John Piggott & John Whalley, 1998. "VAT Base Broadening, Self Supply, and The Informal Sector," NBER Working Papers 6349, National Bureau of Economic Research, Inc.
  4. 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.
  5. M. Shahe Emran & Joseph E. Stiglitz, 2002. "On Selective Indirect Tax Reform in Developing Countries," International Trade 0210003, EconWPA.
  6. Knud MUNK, . "Tax-Tariff Reform with costs of Tax Administration," Middle East and North Africa 330400045, EcoMod.
  7. James E. Anderson, 1996. "Trade Reform with a Government Budget Constraint," NBER Working Papers 5827, National Bureau of Economic Research, Inc.
  8. 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.
  9. Ben Lockwood & Michael Keen, 2007. "The Value-Added Tax; Its Causes and Consequences," IMF Working Papers 07/183, International Monetary Fund.
  10. Hans-Werner Sinn & Andrea Gebauer & Rüdiger Parsche, 2004. "The Ifo Institute’s Model for Reducing VAT Fraud: Payment First, Refund Later," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 5(2), pages 30-34, October.
  11. Michael Keen & Thomas Baunsgaard, 2005. "Tax Revenue and (or?) Trade Liberalization," IMF Working Papers 05/112, International Monetary Fund.
  12. Graham Harrison & Russell Krelove, 2005. "VAT Refunds; A Review of Country Experience," IMF Working Papers 05/218, International Monetary Fund.
  13. Newbery, David M., 1986. "On the desirability of input taxes," Economics Letters, Elsevier, vol. 20(3), pages 267-270.
  14. Michael Keen & Johanna Elisabeth Ligthart, 1999. "Coordinating Tariff Reduction and Domestic Tax Reform," IMF Working Papers 99/93, International Monetary Fund.
  15. Keen, Michael & Lockwood, Ben, 2006. "Is the VAT a Money Machine?," National Tax Journal, National Tax Association, vol. 59(4), pages 905-28, December.
  16. Hatzipanayotou, Panos & Michael, Michael S. & Miller, Stephen M., 1994. "Win-win indirect tax reform : A modest proposal," Economics Letters, Elsevier, vol. 44(1-2), pages 147-151.
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