IDEAS home Printed from
   My bibliography  Save this paper

The Economic Cost of "Clever" Tax Administration Ideas


  • Glenn Jenkins

    () (Queen's University, Kingston, On, Canada)

  • Bahro BERHAN

    (Eastern Mediterranean University, North Cyprus)


In the 1980's it was popular to introduce incentive systems for the promotion of taxpayer compliance. The partial VAT refunds for consumer purchases that are examined in this paper represent one of such schemes. The partial VAT refund system was an idea that was popular amongst professional tax administrators in the 1980s and as a consequence was implemented throughout Central America, Bolivia and Turkey. Such proposals were made with little or no research on the compliance or economic costs that such provisions create. The objective of this study is to measure the compliance costs incurred by the private sector and to measure the administrative costs incurred by the tax authorities in their effort to issue partial VAT refunds for private consumption purchases in Northern Cyprus. Based on the survey of those participating in the scheme, the results indicate that the total compliance and administration costs incurred in North Cyprus in 2003 to run its VAT refund scheme was over US$4.5 million, an amount equal to 1.5 times the total budgetary expenditures made to administer all the domestic taxes in the country, or about 5 percent of the total revenues raised by the VAT in 2003. These results indicate how dangerous it is to introduce indirect tax enforcement measures without first undertaking a careful evaluation of the compliance costs that such measures impose. From an economic perspective, these costs are a complete waste scarce economic resources.

Suggested Citation

  • Glenn Jenkins & Bahro BERHAN, 2004. "The Economic Cost of "Clever" Tax Administration Ideas," Development Discussion Papers 2004-02, JDI Executive Programs.
  • Handle: RePEc:qed:dpaper:155

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Jeff Pope, 1999. "The Compliance Costs Of The Goods And Services Tax: Major Issues," Economic Papers, The Economic Society of Australia, vol. 18(2), pages 61-77, June.
    2. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Compliance Costs; Administration Costs; Value Added Tax; Refunds;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General


    Access and download statistics


    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:qed:dpaper:155. 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: (Bahman Kashi). 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.

    If CitEc recognized a reference but did not link an item in RePEc 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 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.