Abstract
The principle of neutrality lies at the core of the European VAT model. In other models, this principle is deemed less important. The most illustrative in this respect is the Chinese VAT system, in which the government has departed from the neutrality principle in order to be able to regulate export structure more efficiently. Since Russia with its resource-oriented export structure is now facing a similar challenge, it may benefit from adopting some of the relevant Chinese experience and thus improve the export potential of its non-resource industries, which is the question this paper seeks to explore. Our hypothesis is that differentiated export VAT refund rates, which signifies a deviation from the VAT neutrality principle, can be used for export regulation. The research relies on the comparative analysis method and the method of analogy. We conducted a detailed analysis of VAT neutrality by focusing on the constitutive elements of the VAT (object of taxation, subject of taxation, tax rates and tax period) and the corresponding types of neutrality. We also compared realization of different neutrality types in China and Russia and the resulting distortionary effects. Our analysis has shown that significant distortions of the VAT neutrality principle are observed in both systems. Some of the elements from the Chinese model can be adopted in Russia, for example, the system of incomplete VAT refunds to exporters. In order to evaluate exporters’ credibility, two criteria may be applied. First, their credibility may be assessed with the help of the Automated System for Monitoring VAT Refunds. Second, companies participating in industrial charters and associations can be deemed more credible than those that don’t. These two criteria could underpin the application of reducing coefficients. The algorithm for setting the values of these coefficients is described. For the second criterion, we calculated the effect that would be achieved if the export coefficients are introduced. Our study has shown that in the Russian context, differentiated export VAT refund rates could open new opportunities for regulation of the export structure and enhance tax compliance of exporting companies. For citation Karpova O.M., Mayburov I.A., Yong Fan. Prospects and Problems of Realization of the VAT Neutrality Principle in Russia and China. Journal of Tax Reform. 2020;6(2):124–141. DOI: 10.15826/jtr.2020.6.2.078. Article info Received June 19, 2020; Revised July 20, 2020; Accepted August 8, 2020
Highlights
This chapter provides a description and assessment of the UK tax system, placing it in historical, international, and theoretical contexts
From 1997 to 2005, house price inflation averaged more than 10% a year, far outstripping both the inheritance tax threshold and the stamp duty zero-rate threshold
A 10% lower rate was introduced for companies with less than £10,000 of taxable profits, and this lower rate was cut to zero in April 2002
Summary
We provide a description and assessment of the UK tax system, placing it in historical, international, and theoretical contexts. Their work addresses the substantive policy issues while simultaneously making important contributions to the literature; it will be well cited and influential They begin by providing an overview of the income tax system in the UK and reviewing the impacts on labour supply. In the first part of the chapter we describe the modelling approaches to labour supply, and we discuss the main implications of these theoretical contributions We explain how these are relevant to modelling and understanding the incentive effects of taxation and welfare benefits and demonstrate that policy analysis requires one to consider the incentives implied by the entire tax and benefit system as an integrated whole. These include both economic changes and advances in the research literature. Since the publication of the Meade Report theoretical advances have deepened our understanding of the strategic interactions between governments in tax setting behaviour, and empirical work has helped to highlight which of these theoretical considerations are most important
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