Efficient Tax System Research Articles

Monitoring of the BEPs actions plan implementation in the context of fiscal regulation: scientific substantiation of the methodology

Since January 2017, Ukraine has joined the OECD's Inclusive Framework and committed itself to implementing the BEPS Minimum Standard. The national tax system is similar in structure to the tax systems of developed countries. At the same time, the country's recognition of generally accepted standards for combating aggressive tax planning requires significant adaptation of the legal framework. Monitoring of the legislative process of implementing the BEPS Action Plan is an important area of further development of state regulation in the tax area and an effective means of achieving the proper quality of tax legislation and creating a modern and efficient tax system. The regulatory assessment of the state of national legislation will facilitate a detailed understanding and analysis of possible positive effects, achievement of results in the fight against tax evasion and base erosion, and avoidance of legal conflicts and contradictions. Monitoring the legislative process of implementing the BEPS Action Plan measures allows us to identify the necessary areas for improving the national legislative system and track the positive and negative effects of the application of legislative norms. Monitoring of regulatory legal acts is a tool for the development of future-oriented legislation, as it involves the study of legislation to obtain information necessary for assessing, forecasting, controlling and formulating recommendations for improving the regulatory framework and ensuring its optimal condition. As a member of the OECD Inclusive Framework, Ukraine has implemented the BEPS Action Plan Minimum Standard through significant adaptation of the national tax legislation and its approximation to the provisions of international tax instruments. Monitoring of the legislative process of implementing the BEPS Action Plan is an important area of development of state regulation in the tax area and an effective means of achieving the proper quality of national tax legislation and further development of an effective tax system.

Wells or Welfare? Macroeconomic implications of the Canadian oil subsidy

The study constructs a general equilibrium model to investigate the macroeconomic effects of oil production and investment subsidies. To make the model reflect real-life situations, the study incorporates Canadian economic data and uses a Bayesian method to fine-tune the model. Although subsidies boost the short-term economic effects of oil price shocks, they lead to overall losses in economic welfare over time, regardless of the channel through which they are provided. The study shows that a less aggressive headline inflation-targeting monetary policy combined with an efficient tax system is more beneficial in terms of welfare maximisation. The findings suggest three essential and complementary policies: a gradual phase-out of oil subsidies, starting with investment subsidies due to their relatively high welfare cost; increased investment in the green energy sector to reduce carbon footprints and offset the decline in oil and gas sectors; and improved coordination between fiscal and monetary policies.

Entrepreneurial Views to the (Tax) Accountability of Taxpayers in Madagascar

No country can live without autarchy or can develop fully without autonomy. However, each country is classified according to its stage of development, whether it is underdeveloped, developing or developed. This classification depends on the economic, political and social strength of the country in question. The objective of this article is to present the perspective of entrepreneurship vis-à-vis economic policy, with particular emphasis on the country's fiscal management. In this context, many entrepreneurs are impacted by this policy, and we can see that the current social inequality in Madagascar is largely justified by the purchasing power of its population. This situation will lead to a proliferation of informal companies and tax evasion. This is an opportunity for decision-makers, including politicians, to make a thorough assessment. It is also a crucial moment for the Malagasy population to wake up and remain united in the interest of the country. The aim of this work is therefore to highlight the place of entrepreneurship in a country like Madagascar and to promote its role. In this regard, recommendations are made to all decision-makers, notably politicians and the State, with a view to establishing a fair and efficient tax system in Madagascar.

Tax Capacity and Tax Effort in Turkiye and the European Union Countries: An Empirical Application

An efficient tax system is pivotal for effectively implementing fiscal policy and fostering economic development. The extent to which a tax system realizes its full potential determines its efficacy. Nevertheless, existing literature highlights that various economic, social, demographic, and institutional factors can impose limitations on realizing potential tax capacity, thereby constraining the level of tax effort. In this context, this research’s principal objective is to assess tax efforts spanning 1995 to 2021 for 27 European Union member states, 3 European Economic Area nations, and Turkiye. Within this framework, our regression analysis attempts to unveil the influence of critical factors affecting taxable capacity, including sectors with inherent tax challenges, international trade dynamics, the scope of the shadow economy, and the level of financial development. The findings of our study shed light on several noteworthy trends. Northern European countries exhibit a notably higher level of tax effort than the remaining sample countries and Turkiye, which lags behind the sample’s average tax effort level. Furthermore, the study postulates that enhancing financial development and curbing the shadow economy can contribute to the expansion of fiscal space by bolstering tax capacity. Key Words: Tax Capacity, Tax Effort, Tax Policy, Panel Data Analysis JEL Classification: H20, E62, 023

Towards full decarbonization: does environmental tax and renewable energy matters in developing countries?

ABSTRACT Despite the role of energy in growth and development, the consumption of fossil fuel rises the global temperature, which poses a significant threat to the full decarbonization agenda of the global community. This study examines the impact of environmental tax and renewable energy on the full decarbonization of 25 developing countries with data from 1993 to 2019. The study used DCCE and CS-ARDL estimators, and the results revealed that environmental tax and renewable energy promote full decarbonization. Moreover, the evidence indicates the validity of the environmental Kuznets curve (EKC) in developing countries, with a turning point at 2.56 in the DCCE to 1.44 in the CS-ARDL. Also, the findings confirmed financial development's role in enhancing renewable energy's impact on full decarbonization in developing countries. Therefore, of this study confirmed the ‘double dividend’ hypothesis that environmental tax policy can mitigate CO2 emissions, correct ecological externalities, and generate revenue. Policymakers in developing countries should strive to undertake tax reform to achieve efficient tax system. In addition, they should formulate and enforce effective environmental tax policies to accelerate full decarbonization and achieve SDGs. Also, massive investment should be channeled to renewable energy projects to provide affordable and cleaner energy, to minimize the consumption of fossil fuel.

Does government effectiveness moderate the relationship between regulatory quality and tax complexity?

This research aims to analyze the relationship between regulatory quality and tax complexity worldwide and whether this relationship is moderated by government effectiveness. The hypothesis is that robust regulations would promote simplicity and efficiency in the tax system. This study incorporates 100 countries as a sample, derived from the tax complexity index developed in 2016. Further, a moderated regression using SPSS PROCESS Macro is used to test the hypotheses and generate findings. This study shows that regulatory quality relates to the tax complexity in the countries and the effectiveness of the government indeed moderates this relationship. The tax authority, the Directorate General of Taxes, may use the findings to address the importance of the quality of regulations in shaping an efficient tax system.

Factors influencing Voluntary Tax Compliance Among Small and Medium sized Enterprises in Kenya

Tax compliance is essential for generating revenue to fund government activities and public services. Despite the efforts of the Kenyan Revenue Authority (KRA), compliance remains a challenge due to factors such as complex tax systems, high compliance costs, and negative taxpayer attitudes. The study examines the factors that influence voluntary tax compliance, including information availability, tax compliance costs, and individual attitudes and perceptions. It delves into tax compliance theories, such as the Contingency Theory of Taxation and the Ability to Pay Theory, shedding light on their impact on organizational behavior and financial performance. Empirical evidence from previous studies is discussed, highlighting the importance of tax education and the perception of tax fairness in promoting compliance. The study also identifies challenges specific to Kenya, such as a complex tax system, high compliance costs, and negative attitudes toward taxation, which hinder compliance, particularly among SMEs. It underscores the efforts made by the Kenyan Revenue Authority (KRA) to enhance compliance but acknowledges the persistence of challenges. The abstract concludes by emphasizing the need for a comprehensive understanding of tax compliance to ensure an equitable and efficient tax system that supports economic growth and national development in Kenya and other developing nations.

What is the role of institutional quality in health outcomes? A panel data analysis on 158 countries from 2001-2020

Our study investigated the impact of institutional quality on health system outcomes, utilizing worldwide governance indicators and analyzing data from 158 countries between 2001 and 2020. We employed Principal Component Analysis (PCA) to create a composite index of institutional quality and conducted various tests to select the appropriate econometric model. The role of institutional quality, along with other variables, in health outcomes was estimated using fixed effects and generalized method of moments (GMM) models. High-income and low-income countries were analyzed separately. The results of our study revealed that institutional quality, as measured by Control of Corruption, Voice and Accountability, Political Stability, Rule of Law, Regulatory Quality, and Government Effectiveness, had a negative impact on infant mortality rates and a positive impact on life expectancy. Similarly, variables such as GDP, mean years of schooling, total health expenditure, and urbanization rate showed a negative association with infant mortality rates and a positive association with life expectancy. Conversely, the logarithm of CO2 emissions exhibited a positive effect on infant mortality rates and a negative effect on life expectancy. These findings highlight the crucial role of institutional quality in determining health outcomes. Improving institutional quality contributes to the development of democratic and meritocratic systems, infrastructure enhancement, efficient tax and subsidy systems, optimal budget allocation, improved public education, and enhanced access to primary healthcare services. The influence of institutional quality is particularly significant in high-income countries compared to low-income countries. In conclusion, our study emphasizes the importance of institutional quality in shaping health system outcomes. Enhancing institutional quality is essential for the overall advancement of healthcare systems, encompassing governance, infrastructure, education, and access to healthcare services. It is crucial to prioritize efforts to improve institutional quality, especially in high-income countries, to achieve better health outcomes for populations worldwide.

Modification of the tax system under conditions of a state of war

The article reveals the challenges of transforming the tax system during a state of war. The tax system is a crucial element of the country’s economy, as its efficiency directly impacts the volume of investments, entrepreneurial development, and the level of social security. Addressing these issues in this sphere is urgent, as it can slow down the nation’s progress and disrupt financial stability. Since the beginning of the war, the country has been actively working to find optimal means of supporting the tax system. Various transformations have been implemented to optimize and ensure the continuous functioning of the tax sector, including employing different policies and instruments to execute strategies. Reforms aimed at creating effective policies and tools for their implementation have already been introduced. However, the conditions of war are extremely dynamic, and changes in the economic structure are challenging to predict and control. This leads to challenges in achieving an optimal balance between maintaining the stability of the economic system, supporting domestic businesses, meeting the citizens’ needs, and providing the necessary financial resources for the military. The dynamics of military events and uncontrolled changes in the economy create complexities in achieving an optimal balance between system stability, support for domestic businesses, citizens’ needs, and the demands of the military. Considering the importance of the tax sector for the state’s financial sector, special attention is given to making changes to support and optimize this area during times of war. The tax system is a significant factor influencing the country’s economic development. Its effectiveness determines how well the country can promote entrepreneurship and provide social security for its citizens. An efficient tax system involves the redistribution of financial resources in the economy, ensuring the functioning of the payment system, and other critical processes. Consequently, measures aimed at improving the tax sphere become an integral part of broader efforts to develop and ensure the stability of Ukraine’s economy during wartime. In the context of optimizing the tax sector, significant changes have been implemented organizationally, some of which can be considered extraordinary. However, they have proven to be effective and rational components of strategic crisis management. The key regulators that contribute to changes in the tax policy structure are the fundamental principles of monetary and credit policies during the state of war and the Tax Code of Ukraine. Given the complex nature of Ukraine’s tax system, it has become crucial to summarize the results of already implemented measures. Such an analysis is necessary to determine optimal ways of optimization and improvement, particularly during a state of war when economic activities are subject to changes and risks. Summarizing the results of research conducted in the tax field allows for assessing the effectiveness of implemented reforms and developing scientifically justified recommendations to ensure the stable functioning of the system amid external challenges. The main goal of this analysis is to identify potential risks and problematic aspects that could reduce the efficiency of the tax system and lead to adverse consequences for the country’s economic stability. A scientifically grounded approach to summarizing research data enables the formulation of action plans to address issues and explore new opportunities. Only such an analysis will ensure the stable development of the country and its financial resilience in the face of unforeseen challenges.

Indirect methods of estimating tax liabilities theoretical and practical aspects

This article represents a complex research on the indirect methods of estimating the incomes of natural and legal persons, residents and non-residents, control that is carried out based on information from indirect sources and aims to identify taxpayers who obtained income and did not declare it. The importance of these methods is indisputable, as they are applied in most states with efficient tax systems, based on the given methods it is possible to calculate tax obligations that have been hidden by the dishonest taxpayers. The applicability of the given methods in the Republic of Moldova has increased in the last 5 years, by means of the given methods, fiscal equity has been restored, tax evasion has been limited and the state’s tax revenues have increased. In the results of the application of indirect methods, undeclared income is usually identified, taxes on this income, late fees and fines are levied.

Comparing the Destination Principle and Origin Principle in Sales Tax: Implications for Pakistan's Tax System

This study evaluates the influence of destination and origin principles on the tax system of Pakistan. This study examines destination and origin concepts, terminology, and the VAT system. This report comprehensively examines literature, data, and case studies to evaluate the appropriateness of these approaches for Pakistan's tax system. Sales tax is levied based on the destination principle, whereby it is determined by the location of the eventual user rather than the producer. The origin principle imposes sales tax based on the location where goods or services are produced or rendered. To comprehend the practical implications of these principles, it is essential to compare and contrast the concepts of "sales" and "supply".The legal definition of "business" impacts sales tax in various transactions. Comprehending zero-rated supply is essential due to its influence on the tax liability of different goods and services. The excise tax is a component of the sales tax in Pakistan. Excise duty is levied on domestically produced, imported, and sold goods within the nation. The responsibility for liability lies with either the manufacturer or importer, depending on their manufacturing capacity or the specific items involved. Furthermore, the paper examines the concept of value-added tax (VAT). Producers improve raw materials prior to selling the end product or service. The Value Added Tax (VAT) system effectively captures value addition at every stage of production, thereby improving efficiency and eliminating biases in production choices. This study examines the difficulties encountered by small traders and retailers within Pakistan's tax system, specifically in relation to sales tax. An efficient tax system requires improved tax administration and voluntary compliance. Comparing sales tax principles is beneficial for tax policymakers in Pakistan. It facilitates comprehension of the pros and cons associated with each concept, enabling well-informed choices regarding tax systems to attain economic objectives and generate income. The report encompasses pertinent literature and legal obligations pertaining to the tax policy discourse in Pakistan.

Impact of Direct Taxation on Economic Growth: Empirical Evidence Based on Panel Data Regression Analysis at the Level of Eu Countries

Through fiscal policy, the government can influence businesses and individuals in order to regulate their behaviour. The research used panel data from all 27 EU countries covering the period 2008–2020 to investigate the impact of direct taxation on economic growth at the level of two main clusters of countries concerning fiscal efficiency. Therefore, the analysis employed cluster methods to classify the main EU countries in both groups of countries with a high level of fiscal efficiency and those with a rather limited level of fiscal efficiency. The study employs fixed effect models and dynamic GMM methods to investigate the effect of direct taxation components (personal and corporate income taxes) on economic growth. The analysis also considers the informal economy’s role in relation to the official economy. The empirical results revealed that corporate income taxes significantly negatively impact economic growth for both clusters of high- and limited fiscal efficiency countries. Additionally, personal income tax was associated with lower economic growth for countries in the limited fiscal efficiency group. Thus, from the perspective of policymakers, lowering direct taxation can increase disposable income, stimulate consumption and economic growth, encourage investment leading to job creation, increase competitiveness, and reduce tax evasion and avoidance, thereby leading to a more efficient tax system.

Inter-Dependency and Inter-relationship Among Tax Revenue, Infrastructure and Human Capital Development in Nigeria: Small Scale Macroeconometric Model

Recently, there has been increased calls for human capital development across the African economics. The role of human capital to economic growth and development cannot be overemphasized. Infrastructural development and efficient tax system are veritable tools for promoting human development. When human development is stunted, infrastructural development and tax revenue also shrink. This paper examined the inter-relationship and interdependency among tax revenue, infrastructure and human development in Nigeria for the period 1980- 2021. This paper adopted the simultaneous equation modeling approach and a system of equations where tax revenue, infrastructure and human development are taken to be exogenous. From the result, temporary 10 percent increase in value added tax revenue has higher effect on human capital development , real GDP and broad money supply. In contrast, permanent increase in value added tax revenue has higher effect on government spending on social and community services(including health and education) and inflation rate than the temporary 10 percent increase in value added tax revenue. Hence, to increase human capital development in Nigeria, temporary tax revenue shock is sufficient. The government should diversify its revenue base and expend more on health and education in addition to building a strong institutional framework to ensure the efficacy of government spending on both health and education. Keywords: Infrastructure, human capital, macroeconometric model, tax revenue, Nigeria JEL Codes: H54, J24, F41, H24 DOI: 10.7176/RHSS/13-6-04 Publication date: March 31 st 2023

TAX SYSTEM STRATEGIES, THEIR ANALYSIS AND WAYS OF IMPROVEMENT IN REPUBLIC OF ARMENIA

Tax system strategies generally indicate the set of mechanisms needed to create an efficient tax system. In this context, the analysis of the strategies of the tax system is aimed at the discussion of the correct definition of strategic goals and the possibilities of their implementation. By analyzing the strategies of the RA tax system, the omissions and errors are revealed, which should be taken into account in the process of developing tax system strategies. It is necessary to improve the strategies of the tax system, because as a result it will be possible to develop such goals. In turn, the implementation of the strategy may contribute to the formation of an effective tax system. In this regard, the performed analyzes and studies show that one of the directions for improving the strategies of the tax system is the objective and fair evaluation of the functions of the tax system. The formation of an objective and effective evaluation system of the functions of the tax system will allow to understanding to what extent the performed functions contribute to the realization of the goals of the tax system by implementing such functions, as a result of which the efficiency of the tax system will increase.

Non-resource revenues and the resource curse in different institutional structures: The DIGNAR-MTFF model

Numerous studies have examined the resource curse using different perspectives. This study investigates how the resource curse occurs in three countries with different institutional structures using a new model. The DIGNAR-MTFF model introduced and presented in this article is a combination of the DIGNAR model and the FMM-MTFF model. This model includes a consistent framework for industrial production, the inflow of intermediate goods, public investment inefficiencies, learning-by-doing externalities in foreign and intermediate goods sectors, and absorptive capacity constraints. In this research, the Input-Output Table data for Saudi Arabia, Mexico, and Norway in 2015 have been used. A simplified three-sector version of the Input-Output table compares the model's output for countries. The model is used under a specific scenario with different oil revenue cycles. The results for Saudi Arabia, a country with a specific institutional structure characterized by high dependence on oil revenues, show that the effects of abundant resources on non-resource incomes are severely negative indicating that Saudi Arabia experienced the Dutch disease with more intensity. The Dutch disease was less severe in Norway and Mexico, which have broader tax systems based on different institutional structures. The model's results show the role of an efficient tax system in overcoming natural resources' revenue cycles and the independence of the economies from these revenue cycles thus avoiding the resource curse.

EFFECT OF MORAL CONDUCT ON TAX MANAGEMENT: COHERENT PERCEPTIVE

The exploration was undertaken on the effect of moral conduct on tax management: Coherent perceptive. The objectives were to: determine the effect of tax equity on tax management in Nigeria; investigate how tax payers’ integrity influence tax management in Nigeria; ascertain the nexus of fairness and tax management in Nigeria; and examine the impact of honesty on tax management in Nigeria. The design adopted in this study was an ex post facto design. This is because the events had already taken place before the investigation is carried out. The ex-post facto design uses descriptive survey to scientifically collect data from a population and explores the relationship between the dependent and independent variables. The data for the study were analyzed with multiple linear regression technique to determine the nexus between the moral conduct of tax payers and tax management. The result revealed that tax equity, taxpayers’ integrity, tax fairness and tax honesty affect tax management in Nigeria. Therefore, the study ended by making the following suggestions; that great care should be taken in developing a code of best practice for tax managers to ensure that all the moral factors are effectively addressed within this code for efficient and effective tax structure. The public authorities and tax managers should encourage taxpayers’ knowledge and integrity through the provision of quality infrastructural facilities and other incentives to enhance its revenue generation. The motivation of tax payers through the provision of public goods and services will help to encourage them to remit their tax liabilities and hence improve on their moral conducts for efficient tax management. Individual tax laws need to adhere to moral internal and external standards, such as equal treatment and principles imminent to a given tax, derived from its legal character. The moral quality or fairness of tax law is important because it determines the reach of the obligation of the constituents to pay taxes and the level of voluntary compliance. The tax system should be fair and objective. High level of literacy and managerial capability should be enhanced through adequate sensitization and awareness on the part of the taxpayers, while the managerial competence of the tax collectors should be appropriately enhanced towards the development of efficient tax system. 
 
 JEL: L20; L23
 
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Reasons of Tax Evasion and Tax Avoidance: Case of Debre Markos Town, East Gojjam Zone, Amhara National Regional State

The main purpose of this study is to examine the causes of tax evasion and tax avoidance of tax payers’ reflection from Debre Markos town. Stratified sampling technique was applied to select respondents based on the nature of the tax payers by category A, B and C tax payers. The required sample was determined through proportional random approach from each stratum & a total of 365 taxpayers were taken as a sample. For the accomplishment of this study, the researcher used primary sources of data. Primary data were obtained through distribution of self-administered questionnaires to sampled respondents of 365 tax payers. The collected data has been analyzed through descriptive statistics by statistical package for social science (SPSS) software for the purpose of this study. The implications of these results were low quality of the service in return for taxes, absence of tax morality, non-existence of an equitable & efficient tax system and the existence of high tax rate. Poor relationship of tax payers & the authority, lack of adequate enforcement for default, lack of adequate tax incentives and greed and selfishness are not the major reasons for tax evasion and tax avoidance in the study area. Therefore, I recommended that, the town’s tax authority should promote the quality of public services, transparency and control of the public budget and minimize low tax morale by promoting a tax-paying citizen culture and educating taxpayers. Keywords: Tax Evasion, Tax Avoidance, Taxpayers, Causes, Ethiopia DOI: 10.7176/JESD/12-9-01 Publication date: May 31 st 2021

State Individual Income Tax Conformity in Practice: Evidence from the Tax Cuts & Jobs Act

Nearly every state incorporates the federal tax code into its individual income tax system. This widespread incorporation has many supporters and has been justified on the basis that it is necessary in order for states to have a simple and efficient tax system. This article explores the practical effects and dynamics of state tax conformity through a novel examination of how states that tightly conformed to the federal individual income tax responded to the recently enacted Tax Cuts and Jobs Act which, for these states, would have both raised state taxes and changed the distribution of state tax burdens. The study reinforces concerns raised in both the theoretical and economic literature regarding conformity’s enhancement of revenue volatility and likelihood of distorting state legislative decision-making, while adding several new observations of conformity’s impact. The study illustrates that conformity imposes significant time constraints on state legislatures, conformity causes not only revenue shocks, but tax policy shocks, and even where state revenue is kept constant following a federal change, conformity may cause relative state tax burdens to change. Based on these findings, the article concludes by offering suggestions for how states can move past the idea that extensive conformity with the federal tax code is required and instead design an individual income tax system that is simple, efficient, and enhances a citizen’s relationship to the state.

ОРГАНИЗАЦИЯ ДЕЯТЕЛЬНОСТИ ОРГАНОВ НАЛОГОВОГО КОНТРОЛЯ ПО ВЫЯВЛЕНИЮ И ПРЕСЕЧЕНИЮ УКЛОНЕНИЙ ОТ УПЛАТЫ НАЛОГОВ (НА ПРИМЕРЕ РЕСПУБЛИКИ СЕВЕРНАЯ ОСЕТИЯ – АЛАНИЯ)

The article is devoted to the study of the features of the organization of control over tax evasion (on the example of the Republic of North Ossetia-Alania). The main dangers for the tax system of the Russian Federation are identified. It is concluded that the efficiency of the state's tax system is one of the main indicators of its economic security. A highly efficient tax system with a well-established mechanism of tax control is a mandatory component in the formation of a strong state characterized by sovereignty, independence, the ability to defend itself and the means to solve socio-economic problems.

Valued Added Tax (VAT) Impact on Economic and Societal Well-Beings (Pre-and Post COVID19): A Perception Study From Saudi Arabia

The Kingdom of Saudi Arabia (KSA) has realized that merely relying on oil reserves, as the main income source will stop the country from achieving sustainable economic growth due to the instability of world oil market prices and its uncertainties. Hence, the first Value Added Tax (VAT) has been introduced in KSA in 2018 following to the urge by International Monetary Fund (IMF). However, VAT implementation in the Kingdom is not free from criticisms since its citizens, particularly younger generation, have been used to tax-free livings. In addition, the global health pandemic of COVID19 has hit major economies worldwide. In correspondence, KSA has decided to increase its VAT rate to 15% from 5% by the 1st of July 2020, which may suggest a different pattern of consumption behaviour since the rate has been drastically increased. Therefore, this study aims to examine the perception of Saudi younger generation on the acceptance of VAT based on five categorical factors underlying Saudi younger generation’s level of acceptance or rejection of VAT, namely; tax system effectiveness (TSE), income generation sources (IGS), income inequality (II), system knowledge (SK) and global practice (GP). The study also is set to examine the impact of VAT on Saudi younger generation’s consumption behaviour. Using a sample of 460 respondents, the findings reveal that most of the respondents (89.6%) are aware of VAT implementation. However, the negative perceptions found from the analysis shows that VAT is not an efficient tax system to be implemented (average TSE = 45.6% less favourable) as the VAT system does not provide income inequality among citizens (average II= 45.3 percent less favourable). Moreover, the results also show that VAT implementation does not affect the consumption behaviour, suggesting that Saudi younger generation still spends regardless of VAT. Limited studies among the GCC academics on VAT has motivated this research to be among the first attempt to document such impact and to consider it in lights of new legislative changes due to COVID-19. Hence, this study is both timely and relevant to provide new understandings to responsible authorities regarding its VAT system, its acceptance and impacts on consumption behaviour in lights of COVID-19.