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A VAT Revenue Simulation Model for Tax Reform in Developing Countries

Author

Listed:
  • Glenn P. Jenkins

    (Department of Economics, Queen's University, Kingston, Canada and Eastern Mediterranean University, North Cyprus)

  • Chun-Yan Kuo

    (Senior Fellow, John Deutsch International, Department of Economics, Queen’s University, Canada,)

Abstract

In this paper, we develop a model to simulate policies and revenues for a value-added taxes (VAT) system in countries that have an indirect tax system containing sales, excise taxes, and tariffs. An application of the model is carried out for Nepal, which has recently introduced the VAT to replace its sales tax system and rationalize its excise and tariff systems. The study shows that, in a developing country, tax policies that might seem very realistic and politically noncontroversial are likely to yield a very narrow tax base. If a government of a developing country wants to rely more on the VAT over time, it must move aggressively to broaden the base and enhance compliance.

Suggested Citation

  • Glenn P. Jenkins & Chun-Yan Kuo, 2000. "A VAT Revenue Simulation Model for Tax Reform in Developing Countries," Development Discussion Papers 2000-12, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:5512
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    Cited by:

    1. Fang, Hongsheng & Bao, Yuxin & Zhang, Jun, 2017. "Asymmetric reform bonus: The impact of VAT pilot expansion on China's corporate total tax burden," China Economic Review, Elsevier, vol. 46(S), pages 17-34.
    2. Takeshima, Hiroyuki, 2017. "Overview of the evolution of agricultural mechanization in Nepal: A focus on tractors and combine harvesters," IFPRI discussion papers 1662, International Food Policy Research Institute (IFPRI).
    3. Ristić Milica & Todorović Jadranka Đurović & Đorđević Marina, 2019. "Factors of the Value Added Tax Collection Efficiency in the Republic of Serbia," Economic Themes, Sciendo, vol. 57(1), pages 35-49, March.
    4. Andrew Feltenstein & Jorge Martinez-Vazquez & Biplab Datta & Sohani Fatehin, 2022. "A general equilibrium model of Value Added Tax evasion: an application to Pakistan," International Economics and Economic Policy, Springer, vol. 19(3), pages 537-556, July.
    5. Chun-Yan Kuo & Sener Salci & Glenn P. Jenkins, 2015. "Measuring the Foreign Exchange Premium and the Premium for Non-Tradable Outlays for 20 Countries in Africa," South African Journal of Economics, Economic Society of South Africa, vol. 83(2), pages 269-285, June.
    6. Zhila Abshari & Glenn P. Jenkins & Chun-Yan Kuo & Mostafa Shahee, 2021. "Progressive Taxation versus Progressive Targeted Transfers in the Design of a Sustainable Value Added Tax System," Sustainability, MDPI, vol. 13(20), pages 1-17, October.
    7. Wu, Qingchuan & Gong, Yuanyuan & Yan, Zhijuan, 2021. "Whether the policy of RBTVAT has promoted the expansion of UCIBs: Quasi-natural experiment based on new statistical scope data," International Review of Financial Analysis, Elsevier, vol. 77(C).
    8. James B. Davies, 2004. "Microsimulation, CGE and Macro Modelling for Transition and Developing Economies," WIDER Working Paper Series DP2004-08, World Institute for Development Economic Research (UNU-WIDER).
    9. James B Davies, 2009. "Combining microsimulation with CGE and macro modelling for distributional analysis in developing and transition countries," International Journal of Microsimulation, International Microsimulation Association, vol. 2(1), pages 49-56.
    10. Suresh Narayanan, 2014. "The Impact Of The Goods And Services Tax (Gst) In Malaysia: Lessons From Experiences Elsewhere (A Note)," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 59(02), pages 1-15.
    11. Robina Ather Ahmed & Mark Rider, 2008. "Pakistan’s Tax Gap: Estimates By Tax Calculation and Methodology," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0811, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

    More about this item

    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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