Abstract
The main purpose of this paper is to evaluate Value-Added Tax (VAT) effectiveness on income distribution in a group of selected countries with average revenue. One of the challenges of tax policymakers is to apply the VAT system despite its repressive effects. Although VAT is applied on all goods and services with the same rate, regardless of price elasticity and price elasticity of demand, the result is the transfer of the tax burden to consumers. Therefore, it opposes with the principle of tax equity and if overlooked, could end in distrust between taxpayers (consumers) and government and encourage people to evade paying taxes. The results of the study model using fixed effects and Generalized Method of Movement in middle-income selected countries during 1995-2015 showed that VAT has a significant and positive effect on the Gini coefficient as income distribution index. Increasing the VAT rate resulted in increasing the Gini coefficient and inequity. JEL Classification: C23, H21, E24
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
More From: Quarterly Journal of The Macro and Strategic Policies
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.