Virtues and Fallacies of VAT
An Evaluation after 50 Years

About this book:

Virtues and Fallacies of VAT centers on evaluating the use of value-added tax (VAT) from a global policy perspective after over 50 years of experience with its intricacies. VAT is a mainstay of revenue systems in more than 160 countries. Because consumption is a more stable revenue base than other tax bases, VAT is less distorting and hence more likely to encourage investment, savings, optimum labor supply decisions, and growth. Understanding the strengths and weaknesses of VAT is important for policymakers and their advisors when contemplating introducing the tax in a country or evaluating how to improve an existing VAT system. This book offers authoritative perspectives on VAT’s full spectrum from its signal successes to the subtle ways in which its application can undermine revenue performance and economic neutrality.

What’s in this book:

The contributors—leading tax practitioners and academics—examine the key policy issues and topics that are crucially relevant for measuring the success of the tax in the first part of the book, deepening the reader’s understanding of the key policy issues associated with VAT, including:

• revenue generation and revenue efficiency;
• single rate versus multiple rates;
• susceptibility to fraud;
• exemptions and exceptions;
• compliance cost for businesses;
• policy and compliance gaps in revenue collection;
• adjustment rules caused by the transactional nature of the tax;
• transfer pricing issues;
• treatment of vouchers;
• permanent establishments and holding companies;
• payment of refunds;
• cross-border digital transactions; and
• supplies for free or below cost price.

The second part of the book offers six country reports—on New Zealand, Japan, China, Colombia, Ethiopia, and India—to demonstrate how VAT operates in a variety of national economies.

How this will help you:

Whether a government is contemplating the imposition of a general consumption tax for the first time or new rules, policymakers need to keep central the aim to design and implement a tax that realizes optimal efficiency and causes minimal distortions. This invaluable book serves as an expert guide to VAT policy development in the area of general consumption taxation and supports realizing that goal. It will be welcomed by government officials and by tax professionals and academics in the field of tax law.

Table Of Contents

Editor

Contributors

Preface

List of Abbreviations

List of Tables

List of Figures

Chapter 1 Introduction: VAT Does Well, but Does it Well Enough?
Robert F. van Brederode

Part I: Technical Topics

Chapter 2 Revenue Performance
Pierre-Pascal Gendron

Chapter 3 Neutrality v. Equality
Christian Amand

Chapter 4 Rate Policy: Evaluating the Arguments for a Single v. Multiple Rates
Robert F. van Brederode

Chapter 5 Exemptions in VAT: A Theoretical Overview of Traditional and Newer VAT Systems
Christian Knotzer & Sebastian Pfeiffer

Chapter 6 Counting the Costs of VAT Compliance
Chris Evans & Richard Krever

Chapter 7 VAT Gaps in Developing Countries: Measurement, Administration, and Politics
Pierre-Pascal Gendron & Richard Bird

Chapter 8 Susceptibility to Fraud
Robert F. van Brederode

Chapter 9 Value Added Tax Adjustments
Kathryn James & Karoline Spies

Chapter 10 Transfer Pricing
Kathryn James & Karoline Spies

Chapter 11 Vouchers and VAT
Jeroen Bijl

Chapter 12 The Evolving Concept of Fixed Establishment in EU VAT Law
Aleksandra Bal

Chapter 13 How Are Holdings Holding on with VAT?
Charlène Herbain & Christopher Thompson

Chapter 14 VAT Refunds in Developing Countries
Marius van Oordt

Chapter 15 Digital Cross-Border Supplies
Simon Thang & Nicolas Shatalow

Chapter 16 Supplies Below Cost Price or Free of Charge
Madeleine Merkx

Chapter 17 VAT Treatment of Donations in the Light of Green Policy Objectives
Bettina Spilker & Benedikt Hoffmann

Part II: Country Treatises

Chapter 18 The New Zealand Broad-Based, Uniform-Rate GST: Virtue or Fallacy?
David White

Chapter 19 Japan’s Consumption Tax Experiment: Operating a VAT Without a Tax Invoice
Yoshihiro Masui

Chapter 20 The Destination Principle in International Trade in Services: The Chinese Experience
Yan XU

Chapter 21 VAT in Colombia: The Need for a Brand-New Architecture?
Catalina Hoyos

Chapter 22 India: The Challenges of Implementing VAT in a Federal State
Sacchidananda Mukherjee

Chapter 23 The VAT under Excess Capacity: The Case of Ethiopia
Marius van Oordt

Bibliography

Table of Cases

Index