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

EditorContributorsPrefaceList of AbbreviationsList of TablesList of FiguresChapter 1 Introduction: VAT Does Well, but Does it Well Enough?Robert F. van BrederodePart I: Technical TopicsChapter 2 Revenue PerformancePierre-Pascal GendronChapter 3 Neutrality v. EqualityChristian AmandChapter 4 Rate Policy: Evaluating the Arguments for a Single v. Multiple RatesRobert F. van BrederodeChapter 5 Exemptions in VAT: A Theoretical Overview of Traditional and Newer VAT SystemsChristian Knotzer & Sebastian PfeifferChapter 6 Counting the Costs of VAT ComplianceChris Evans & Richard KreverChapter 7 VAT Gaps in Developing Countries: Measurement, Administration, and PoliticsPierre-Pascal Gendron & Richard BirdChapter 8 Susceptibility to FraudRobert F. van BrederodeChapter 9 Value Added Tax AdjustmentsKathryn James & Karoline SpiesChapter 10 Transfer PricingKathryn James & Karoline SpiesChapter 11 Vouchers and VATJeroen BijlChapter 12 The Evolving Concept of Fixed Establishment in EU VAT LawAleksandra BalChapter 13 How Are Holdings Holding on with VAT?Charlène Herbain & Christopher ThompsonChapter 14 VAT Refunds in Developing CountriesMarius van OordtChapter 15 Digital Cross-Border SuppliesSimon Thang & Nicolas ShatalowChapter 16 Supplies Below Cost Price or Free of ChargeMadeleine MerkxChapter 17 VAT Treatment of Donations in the Light of Green Policy ObjectivesBettina Spilker & Benedikt HoffmannPart II: Country TreatisesChapter 18 The New Zealand Broad-Based, Uniform-Rate GST: Virtue or Fallacy?David WhiteChapter 19 Japan’s Consumption Tax Experiment: Operating a VAT Without a Tax InvoiceYoshihiro MasuiChapter 20 The Destination Principle in International Trade in Services: The Chinese ExperienceYan XUChapter 21 VAT in Colombia: The Need for a Brand-New Architecture?Catalina HoyosChapter 22 India: The Challenges of Implementing VAT in a Federal StateSacchidananda MukherjeeChapter 23 The VAT under Excess Capacity: The Case of EthiopiaMarius van OordtBibliographyTable of CasesIndex