Governments and Activities in the Public Interest

Abstract

Chapter 11 discusses the EU legacy of taxing public bodies, illustrated by the African experience. The EU’s out-of-scope approach is bedevilled by distortions arising from the self-supply bias, the investment disincentive, and, somewhat more remotely, unfair competition vis-à-vis the private sector. Outside Africa, countries with VAT have addressed these issues differently. Various EU countries and Canada, for example, have designed input tax refund mechanisms to eliminate the self-supply bias and the investment disincentive. Still other countries, such as New Zealand, tax governments and activities in the public interest in full and have thus come to terms with the unfair competition issue, too. A concluding section summarizes the characteristics and effects of the various approaches and attempts to formulate a recommendation for African countries.