Introduction Of Value Added Tax Research Articles

Efforts & challenges of Nigeria value added tax: from 2000-2020

This paper aims to analyze the efforts and challenges of the Value Added Tax (VAT) system in Nigeria from 2000 to 2020. The introduction of VAT in Nigeria was necessary as part of the government’s fiscal planning to mobilize revenues and strengthen the Nigerian economy. The VAT system has been in operation for more than two decades, and its implementation had its challenges and successes. This study seeks to explore the efforts made and challenges encountered by the Nigerian government in the successful implementation of the VAT system/ from the period under review. A qualitative research approach was adopted, and data was gathered through a literature review. The findings of this study revealed that while the introduction of the VAT system has resulted in increased revenues for the government, there are still challenges that need to be addressed.These challenges include poor tax compliance, weak compliance infrastructure, capacity building, inadequate administrative infrastructure, inadequate enforcement, lack of efficiency, inadequate usage of technology, politicization of the system, and inadequate public awareness. The study concludes by suggesting several measures that could be taken to address these challenges and improve the effectiveness of the system.

Fiscal reform: a computable general equilibrium (CGE) analysis for the Kingdom of Saudi Arabia

PurposeThis paper aims to provide a quantitative assessment of the broad economic effects of tax policy reform in the Kingdom of Saudi Arabia (KSA).Design/methodology/approachUsing a dynamic computable general equilibrium (CGE) model of the KSA, three simulations are run. The first simulation is the baseline simulation, which generates growth paths of the Saudi economy in the absence of tax reform. In developing the baseline simulation, this study incorporates forecasts from the International Monetary Fund. The remaining simulations are policy simulations. A policy simulation deviates from the baseline simulation in response to a policy change. In the first policy simulation, this study introduces a value-added tax (VAT) that generates SAR 35bn. This study assumes budget neutrality with the additional tax revenue transferred to households via a lump sum payment. In the second policy simulation, this study introduces a corporate income tax that generates SAR 35bn. This study then calculates and compares the distortion these taxes introduce into the economy.FindingsThis study finds that although the introduction of new taxes increases government tax revenue, markets are distorted lowering efficiency and production. An introduction of VAT increases the cost of consumption relative to the cost of production. As a consequence, the real cost of labour increases lowering employment in the short run. Employment moves to the baseline, as wages adjust capital and real gross domestic product (GDP) is below base throughout the simulation period. The second simulation is an increase in the corporate tax rate with lowers the post-tax rates of return investors receive. This simulation shows that the negative impact on investment, capital and GDP is larger with the introduction of a corporate tax than with the VAT.Research limitations/implicationsLiterature focusing on tax policy reform in the Gulf Cooperation Council and, specifically, Saudi Arabia is limited. This paper contributes to the literature by focusing on the following: understanding the impact and mechanisms through which changes in taxation impact the economy more generally; understanding the potential harm caused to allocative efficiency and production due to taxes; and ways in which fiscal reform might complement other reforms such as efforts to diversify the economy, labour market and energy price reforms. This improves the information base available to policymakers charged with designing an optimal tax system that meets all future requirements of a country such as the KSA.Originality/valueThe authors developed and applied a CGE model for the KSA to analyse the impact of VAT and corporate tax on the Saudi economy. To the best of the authors’ knowledge, there are no recent CGE models for Saudi Arabia that have been used for tax policy or quantifying the potential harm to the economy when new taxes are introduced.

An Analysis of New VAT Law in Bangladesh: Changes & Challenges

With the adoption of the Sustainable Development Goals (SDGs), taxation has once again taken up a central spot on the international development agenda. Value Added Tax (VAT) makes up most of the revenue from taxes in Bangladesh who was one of the first two South Asian countries to adopt VAT. Although the introduction of VAT in Bangladesh has proved to be comparatively successful in terms of increasing tax revenues, the effectiveness of the tax has been seriously eroded due to a number of deviations from the standard principles of VAT which have crept into the tax system in the last three spans. Hence the new “The VAT and Supplementary Duty Act, 2012” emerges with vast hope and prospect and also with challenges of implementation. This study aims to review the basic structure of VAT system under the new law and the major changes thereon through a qualitative approach based on document analysis. Findings reveal the nonconformity with the objectives of the law and suggest the deviations back on track with a boost in tax administration and a political influence free environment in Bangladesh context.

VAT withholding tax and its impact on vat compliance: evidence from the Zimbabwe revenue authority

Value-added tax (VAT) withholding tax is a key instrument used in various tax administrations to curb revenue leakages that emanate from clients that charge VAT on their services and supplies and then fail to remit it to revenue authorities. The Zimbabwe Revenue Authority (ZIMRA) implemented VAT withholding in 2017 with the expectation that it would positively affect VAT compliance. The motivation of this study therefore arises from the knowledge that a number of developing countries are considering implementing a withholding tax mechanism on VAT. In addition, a number of developing countries such as the Philippines, Ethiopia and Ghana, have implemented VAT withholding tax with varying outcomes. Public finance literature on the empirical analysis of VAT withholding tax is, however, limited as it requires administrative data that most tax researchers are not privy to. This paper sought to undertake a more comprehensive empirical investigation of the direct effect of the introduction of VAT withholding tax on VAT compliance. To estimate the empirical effect of VAT withholding tax on VAT compliance, this paper exploited data of VAT registered clients in ZIMRA over a 24-month period. The study used an ordinary least squares (OLS) multiple regression analysis to investigate the effects of VAT withholding tax on VAT revenue. The study further used a difference-in-differences estimator by classifying VAT taxpayers into two groups. Empirical evidence indicates that there is a positive significant relationship between implementing VAT withholding tax and VAT revenue in the ZIMRA scenario.

Development of the regulatory function of VAT in Russia: prospects for borrowing the Chinese tax refund practices

This article discusses the possible directions for the development of the regulatory function of the value-added tax (VAT) in Russia. The relevance of the study lies in the need to expand the set of tools to support the Russian exports. The aim of this work is to identify the possible directions for the development of the regulatory function of VAT. The authors consider the functions of taxes and prove their thesis about the multifunctionality of VAT. They have distinguished four tax functions: fiscal, regulatory, control, and distribution — and provided the characteristics of each of them. The features of the implementation of the regulatory function of VAT in China are considered. A key feature of the Chinese model is the application of differentiated rates to VAT refund amounts for exporting companies. This practice was introduced a year after the introduction of VAT and today is used as a tool to stimulate (or discourage) foreign trade companies. In addition, the authors have identified three possible ways to use the Chinese experience in Russian conditions. The first direction involves differentiating the amounts of VAT deductions within the framework of the operation of the automated VAT control system (version 2): the most reliable companies receive the most deductions and vice versa. The second area involves the differentiation of VAT deduction amounts within the framework of industry charters: the most trustworthy organizations in the industry receive the largest deductions and vice versa. The third area involves the differentiation of VAT deductions in the framework of national projects: the largest deductions are provided for priority categories of goods. To work in each of these directions, the authors propose a system of export coefficients. An assessment is given of possible distortion of the principle of VAT neutrality, which will inevitably occur when the role of the regulatory function is enhanced.

Value Added Tax: An Instrument used in some African Countries to Meet Fiscal Objectives

This article aims to evaluate the extent at which VAT is used as an instrument by countries to meet their fiscal deficit and meet the needs of their citizenry. Taxpayers pay taxes based on their ability to pay and with an anticipation that they will receive services in return to their contribution from government. The VAT due to its buoyancy nature contributes sizable amount of taxes which alleviate the financial burden of countries in meeting the financial obligations. Numerous kinds of literature demonstrate that whenever countries experience any budget shortfall they always look for fiscal remedies in either introduction of VAT or changing the rate of VAT. South Africa recently changed its long term rate of 14 % VAT to 15%. This article is conceptual in approach and uses the literature to argue that Value Added Tax (VAT) can be used as an effective instrument to meet fiscal objectives in some African Countries. Countries have the responsibility to ensure that their subject contributes to taxes which amongst others should in the form of VAT. As in the case of other taxes, the taxes are used to meet the fiscal obligation a country faces. The paper concludes that many countries that have introduced VAT have managed to meet their fiscal obligation due to high revenue contribution that have emanated from it, making the VAT the best tax methods to enable the country to meet their fiscal obligations.

The impacts of introduction of VAT on the audit profession and economy in the UAE: Auditors’ perspective

Commencing 1st January 2018, Value Added Tax (VAT) was made effective in the UAE. The decision was made in light of the fall in oil prices and with the aim of diversifying the country’s revenue to non-hydrocarbon sectors. This paper examines the impacts of introducing VAT on the audit profession and the economy in the UAE. Unlike previous studies which have viewed this topic from a business or consumer perspective, this paper examines it from an auditor’s perspective. Given that this topic relates to a new policy and there isn’t much literature available on it, this study explores the auditors’ perceptions about the implications of this new policy on both; audit profession and the economy. This paper employs semi-structured interviews with auditors from both Big-Four as well as Non-Big-Four audit firms in order to collect data. This research, apart from being a timely and trending topic, may be useful to academicians, tax specialists, auditors, businesses and regulatory bodies. The findings of the study suggest that auditors are optimistic about VAT implementation in the UAE with respect to the growth in the economy in the long run. However, they have mixed perceptions regarding the audit profession and believe that there is no material impact on it due to VAT implementation.

The impact of VAT introduction on UK residential energy demand: An investigation using the cointegration approach

Over a two-year period, which started in April 1994, the real price of energy to UK households was expected to rise by 17.5% as a result of value-added tax (VAT) introduction. The regressive nature of the tax forced the government to limit VAT on residential fuel to 8%. Using a cointegration approach, to take account of the non-stationarity fuel consumption time series, this paper estimates real energy and fuel specific price and income elasticities for the period 1974:1–1994:1. They suggest that natural gas has a positive real energy price elasticity indicating that, as real price of energy rises, households scrap inefficient heaters and invest in more efficient ones, principally natural gas. These estimates enable projections to be made of the impact of the introduction of VAT and imply a rise in natural gas consumption as a result of the additional VAT, although at the expense of other less efficient fuels. Overall residential energy consumption, however, is unlikely to fall significantly from the tax, suggesting that it is an inappropriate way of achieving environmental objectives.

A General Equilibrium Assessment of the 1973 United Kingdom Tax Reform

Recent contributions to general equilibrium literature by Scarf (1967, 1973) have emphasized both computability of competitive equilibria and potential applications of constructive proofs of existence of competitive equilibria to issues of public policy. Computational techniques directed to these ends have been developed by Shoven and Whalley (1973), an earlier variant (Shoven and Whalley, 1972) being applied to a recalculation of Harberger's (1966) estimates of efficiency loss from differential taxation of income from capital in United States. These methods are applied in this paper to a particular set of policy measures grouped under heading of the 1973 UK tax reform. This group of tax changes has property of being discrete interdependent policy measures carried out at a single point in time from which significant variations in relative prices were to be anticipated. A general equilibrium framework would thus seem indispensable for a systematic evaluation of desirability of changes. No exposition of computational methods is given here, focus being interpretation of results and their relevance to public policy. The method of computing competitive equilibria in 21-dimensional space used in this application is somewhat technical and special features of model are used to bring execution time down within tolerable limits. (Excess demands to a tolerance of 2 x 109 are obtained within seven seconds of execution time on an IBM 360, largest demands at equilibrium exceeding 50,000 0.) The interested reader is referred to Whalley (1973, 1975a) and to Shoven (1973). The particular legal tax changes which are considered are (a) abolition of purchase tax; (b) abolition of selective employment tax (SET); (c) introduction of value-added tax (VAT) including additional tax on new cars; (d) change in system and rate of corporation tax; and (e) move to unified income tax. These changes do not correspond precisely to those introduced in 1973 budget. The United Kingdom before tax reform is represented by averaged data for period 1968-1970 (see Whalley, 1973, 1975b). Some correction is