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VAT indicators

Author

Listed:
  • Alexandre Mathis

    () (European Commission)

Abstract

Under the current VAT system defined in the Sixth VAT Directive, Member States are required to have a single VAT rate of at least 15% and may have a maximum of two reduced VAT rates set no lower than 5%. Annex H of the 6 Directive outlines the list of the goods and services to which reduced rates could apply. However, this basic structure which applies to all Member States is complicated by the numerous individual temporary derogations granted to particular Member States. Most of these specific rates (zero rate, super reduced rates, parking rate and so on) are to be found under the title XVI Transitional provisions Article 28 of the 6 Directive and most have been granted until the entry into force of the "definitive system" of VAT based on taxation in the Member State of origin. The aim of this paper is to shed some light on the application of the current VAT system to both VAT bases and rates among Member States. For the VAT bases, our indicators demonstrate the share of the base to which a specific VAT rate applies relative to the whole taxable base. For the VAT rates, focusing on the statutory standard VAT rate is not satisfactory. To take into account the existence of different VAT rates, we compute implicit VAT rates. These implicit VAT rates give an indication on the VAT burden. Our analysis shows that the standard VAT rate is far from applicable to the whole taxable base. In the year 2000, on average for the EU-15, 69% of the VAT taxable transactions value was taxed at the standard VAT rate. Moreover for some Member States, only around half of the taxable transactions were actually taxed at the standard VAT rate. Therefore, non-standard VAT rates are not the exception as they should be. Taking into account all VAT rates in force gives us an implicit VAT rate that is up to 30% lower than the standard rate in force in the Member States. In the year 2000, the EU-15 average for the statutory standard VAT rate was 19.4% with a minimum (compulsory) of 15% and a maximum of 25%. In contrast, the implicit VAT rate for the EU-15 was 15.9% with a larger volatility.

Suggested Citation

  • Alexandre Mathis, 2004. "VAT indicators," Taxation Papers 2, Directorate General Taxation and Customs Union, European Commission, revised Apr 2004.
  • Handle: RePEc:tax:taxpap:0002
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    File URL: https://ec.europa.eu/taxation_customs/sites/taxation/files/vat_indicators.pdf
    File Function: final version, 2004
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    Citations

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    Cited by:

    1. Ruud de Mooij & Michael Keen, 2012. ""Fiscal Devaluation" and Fiscal Consolidation: The VAT in Troubled Times," NBER Chapters,in: Fiscal Policy after the Financial Crisis, pages 443-485 National Bureau of Economic Research, Inc.
    2. Michael Keen, 2013. "The Anatomy of the Vat," National Tax Journal, National Tax Association, vol. 66(2), pages 423-446, June.
    3. Richard M. Bird, 2005. "Value-Added Taxes in Developing and Transitional Countries: Lessons and Questions," International Tax Program Papers 0505, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
    4. Stanislav Klazar & Barbora Slintáková & Slavomíra Svátková & Martin Zelený, 2007. "Incidence of the VAT Rates Harmonisation in the Czech Republic," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2007(1), pages 45-56.
    5. Luca Barbone & Misha V. Belkindas & Leon Bettendorf & Richard Bird & Mikhail Bonch-Osmolovskiy & Michael Smart, 2013. "Study to quantify and analyse the VAT Gap in the EU-27 Member States," CASE Network Reports 0116, CASE-Center for Social and Economic Research.
    6. European Commission, 2012. "Tax reforms in EU Member States - Tax policy challenges for economic growth and fiscal sustainability – 2012 Report," Taxation Papers 34, Directorate General Taxation and Customs Union, European Commission.
    7. Spengel, Christoph & Heckemeyer, Jost Henrich & Bräutigam, Rainer & Nicolay, Katharina & Klar, Oliver & Stutzenberger, Kathrin, 2016. "The effects of tax reforms to address the debt-equity bias on the cost of capital and on effective tax rates," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, volume 65, number 148156.
    8. Barbora Slintáková & Stanislav Klazar, 2010. "Impact of Harmonisation on Distribution of VAT in the Czech Republic," Prague Economic Papers, University of Economics, Prague, vol. 2010(2), pages 133-149.

    More about this item

    Keywords

    VAT; European Union; Taxation; effective tax rates;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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