Value Added Tax Base Research Articles

Research on the Derivative Rule and Estimation Methods of Intelligent High-Speed Railway Investment Estimation

Taking the investment estimation of intelligent construction of high-speed railway as the research object, based on the historical data of investment of similar high-speed railway projects, this paper builds an explanatory structure model, establishes an system dynamic (SD) model of investment estimation of intelligent construction of high-speed railway, and puts forward suggestions for supplementing the labor value theory and improving the value-added tax. The paper carries out in-depth research and analysis in the following aspects: 1) the list of influencing factors for investment estimation of intelligent construction of high-speed railway in the feasibility study stage is constructed, and the interpretative structural model (ISM) is constructed to sort out the relationship between the influencing factors; 2) the SD model of intelligent construction cost estimation of high-speed railway is established to improve the accuracy of investment estimation of intelligent high-speed railway construction; 3) put forward suggestions and schemes for improving investment estimation content of intelligent construction of high-speed railway under high intelligence; 4) improve and supplement the labor value theory and the value-added tax base.

The redistributive power of cash transfers vs VAT exemptions: A multi-country study.

Like high-income countries, low- and middle-income countries (LMICs) offer reduced rates and exemptions on particular goods and services in their value-added tax (VAT) systems. These policies are often motivated by distributional concerns and target items thought to take up a larger share of the budgets of poorer households. This paper explores the effectiveness of such policies in six LMICs. We estimate their impact on tax revenues, inequality and poverty, and compare these effects to existing cash transfer schemes and a hypothetical Universal Transfer (UT) funded by broadening the VAT base. To do so, we use tax-benefit microsimulation models incorporating input-output tables, allowing us to estimate the impact of exemptions on consumer prices due to VAT embedded in supply chains. We show that although preferential VAT rates reduce poverty, they are not well targeted towards poor households overall. Existing cash transfer schemes are better targeted but generally have limited coverage. A UT funded by a broader VAT base would create large net gains for the poorest households, reducing inequality and most measures of extreme poverty in each of the countries studied. Our results suggest that the widespread practice of providing special VAT treatment to certain goods and services is an expensive way of reaching poor households. In principle, expanding the VAT base and social protection schemes in tandem has the potential to both raise tax revenues and reduce poverty. Such reforms therefore warrant consideration for LMICs as they pursue Domestic Revenue Mobilisation and broader development objectives.

The value-added tax and growth: design matters

Previous research has shown that changes in the composition of tax revenue affect long-run growth. However, little is yet known about whether the way tax revenue is raised matters for growth. This paper examines whether, in the context of OECD countries, a revenue-neutral increase in the value-added tax (VAT), offset by a fall in income taxes, may have different effects on long-run growth depending on how the VAT is raised. We show that a revenue-neutral rise in the VAT promotes growth when it is raised through a rise in C-efficiency, while it does not when it is raised through a rise in the standard VAT rate, the rate applied to the largest portion of taxed consumption. C-efficiency measures the departure of the VAT from a perfectly enforced tax levied at a single rate on all consumption, which in advanced economies is largely due to the VAT that is not levied because of exemptions and reduced rates. Thus, our results suggest that an increase in C-efficiency, possibly reflecting the broadening of the VAT base through fewer exemptions and a more uniform rate structure with fewer reduced rates, promotes growth more than a rise in the standard rate.

Structural transformation and tax efficiency

AbstractStructural transformation has resulted in an increasing share of services in output and employment in advanced and developing countries across the world. We analyse the impact of this shift into services on countries' efficiency in collecting the value‐added tax (VAT). The analysis is based on two alternative measures of VAT productivity: (a) the VAT C‐efficiency, using a broad panel of 134 countries over the period 1970–2014 and (b) the VAT gap using a more granular, proprietary data set that draws on the results of the International Monetary Fund's (IMF's) Revenue Administration‐Gap Analysis Program covering 24 countries over the period 2004–2016. We find that a higher share of services in aggregate value‐added reduces the VAT efficiency, and that this adverse effect is mainly a result of a rise of nontradable services which in turn contributes to a narrowing of the VAT base.

The Value Added Tax and Growth: Design Matters

Does the design of a tax matter for growth? Assembling a novel dataset for 30 OECD countries over the 1970-2016 period, this paper examines whether the value added tax (VAT) may have different effects on long-run growth depending on whether it is raised through the standard rate or through C-efficiency (a measure of the departure of the VAT from a perfectly enforced tax levied at a single rate on all consumption). Our key findings are twofold. First, for a given total tax revenue, a rise in the VAT, financed by a fall in income taxes, promotes growth only when the VAT is raised through C-efficiency. Second, for a given VAT revenue, a rise in Cefficiency, offset by a fall in the standard rate, also promotes growth. The implication is thus that in OECD countries broadening the VAT base through fewer reduced rates and exemptions is more conducive to higher long-run growth than a rise in the standard rate.

Structural Transformation and Tax Efficiency

Structural transformation has resulted in an increasing share of services in aggregate value-added in advanced and developing countries across the world. We analyze the impact of this shift into services on countries’ efficiency in collecting the value-added tax (VAT). The analysis is based on two alternative measures of VAT efficiency: (1) the VAT C-efficiency, using a broad panel of 134 countries over the period 1970-2014; and (2) the VAT gap using a more granular, proprietary dataset that draws on the results of IMF’s Revenue Administraion-Gap Analysis Program covering 24 countries over the period 2004-2016. We find that a higher share of services in aggregate value-added reduces the VAT efficiency, and that this adverse effect is mainly a result of a rise of non-tradable services, which in turn contributes to a narrowing of the VAT base.

Republic of Poland

This report presents the results of applying the Revenue Administration Gap Analysis Program (RA-GAP) value-added tax (VAT) gap estimation methodology1 to Poland for the period 2010–16. The RA-GAP methodology employs a top-down approach for estimating the potential VAT base, using statistical data from national accounts on value-added generated in each sector. There are two main components to this methodology for estimating the VAT gap: 1) estimate the potential VAT collections for a given period; and 2) determine the accrued VAT collections for that period. The difference between the two values is the VAT gap. RA-GAP provides estimates of the two components of the tax gap: the compliance gap and the policy gap. The compliance gap is the difference between the potential VAT that could have been collected given the current policy framework and actual accrued VAT collections. The policy gap is the difference between the overall tax gap and the compliance gap. To put the level and trends of the compliance gap into context it is also necessary to analyze the level and trends of the overall tax gap and the policy gap.

A Study on the Taxation of Mobile Service Company’s Subsidy in the Value Added Tax Base

A Study on the Taxation of Mobile Service Company’s Subsidy in the Value Added Tax Base

Handset Contract Subsidy and the Value Added Tax Base- Focusing on the sales discount -

Handset Contract Subsidy and the Value Added Tax Base- Focusing on the sales discount -

A Study on the Inclusion of Mobile Phone Handset Contract Subsidy In the Value Added Tax Base

A Study on the Inclusion of Mobile Phone Handset Contract Subsidy In the Value Added Tax Base

Importance of Expanding Value Added Tax Base

Importance of Expanding Value Added Tax Base

Importance of theoretical value added tax for Croatia's fiscal capacity in the context of the European Union

The main purpose of this article is to assess Croatia’s fiscal capacity in 2007 by means of the National Accounts Supply and Use Tables (SUT) approach and its harmonisation with EU regulations. National fiscal capacity is important for assessing an EU member country’s contribution to the EU budget. Based on theoretical considerations and EU regulations, Croatia’s GDP expenditure components for 2004 were used for the approximation of Croatia’s theoretical value added tax (VAT) base and a weighted average VAT rate (WAVR). The harmonisation of Croatia’s intermediate VAT base with EU regulations was carried out using cash receipts from the Tax Authority, gross national income (GNI) and WAVR. If the theoretical VAT base of any EU member country is under 50% of GNI then it is used as a base for the calculation of country contribution to EU budget, otherwise it is capped at 50% of GNI. The results of this assessment show that Croatia’s harmonised 2007 VAT base is in the zone of capping and that Croatia’s WAVR is bigger than those of all but one of the 12 new EU member states, while a comparison of theoretical VAT to VAT net cash receipts indicates that there is room for upward revisions of GDP/GNI.

An Assessment of the Revenue Impact of the State Level VAT in India

Revenue and Gross State Domestic Product data for 1993-94 to 2008-09 are used to study the revenue performance of the state Value-Added Tax (VAT) in India's 29 states. Both the direct revenue impact and the indirect impact through the VAT base were assessed. No indirect impact of the VAT on its base was found. The direct revenue impact of the VAT was found to be positive in two-thirds of sample jurisdictions. A positive impact on state's own revenue was however found only in two out of eleven major states and fifty percent of other states. The VAT may have had a negative revenue impact in two states. Since the VAT impact was assessed using dummy variables for the period during which the VAT was present, this implies that results actually reflect differences between VAT and pre-VAT periods rather than the impact of the VAT.To check robustness of direct impact results, the extent to which states 'gaming' the Centre to increase their compensation for a VAT revenue shortfall could have affected statistical findings on VAT performance was assessed and rejected. Whether or not in India as a whole states gaining revenue after VAT implementation could, in principle, compensate states losing revenue was also assessed and also rejected. Limited VAT revenue performance can partly be traced to large scale evasion given weaknesses in VAT administration identified in a 2009 performance audit. Implications of this study for the planned move to a goods and services VAT (from the current goods only VAT) are pointed out and a suggestion is made for a non-VAT goods and services tax which should be less vulnerable to tax evasion.

Taxation Reforms and Changes in Revenue Assignments in China

The value-added tax (VAT) in China has the unusual feature that capital goods are included in the VAT base. In addition, most services are subject to the business tax, which is not creditable against VAT, but which accrues to local governments, and operates as a turnover tax. On grounds of economic efficiency, it would be desirable to eliminate these distortions so that domestic producers are not increasingly placed at a disadvantage as China dismantles tariff and nontariff barriers on competing goods. Reforming indirect taxation would however generate considerable revenue losses for local governments and, in the absence of any compensatory mechanisms, there would be significant impediments to the needed reforms. This paper focuses on the extent of revenue losses, their distribution across provinces, and possible options for compensation.

Taxation Reforms and Changes in Revenue Assignments in China

The value-added tax (VAT) in China has the unusual feature that capital goods are included in the VAT base. In addition, most services are subject to the business tax, which is not creditable against VAT, but which accrues to local governments, and operates as a turnover tax. On grounds of economic efficiency, it would be desirable to eliminate these distortions so that domestic producers are not increasingly placed at a disadvantage as China dismantles tariff and nontariff barriers on competing goods. Reforming indirect taxation would however generate considerable revenue losses for local governments and, in the absence of any compensatory mechanisms, there would be significant impediments to the needed reforms. This paper focuses on the extent of revenue losses, their distribution across provinces, and possible options for compensation.

Equivalence of the Production and Consumption Methods of Calculating the Value-Added Tax Base: Application in Zambia

Two methods of calculating the value-added tax (VAT) base, using production and consumption data, respectively, have been applied in different countries to estimate VAT revenue. It is not apparent that these methods should produce the same result for a particular country because each method requires different adjustments for exemptions. This paper establishes analytically the equivalence of the two methods. Both methods are applied to Zambia. Given the limitations of data, the two methods produce different results, yielding an estimated range for VAT revenue of 2-3 percent of GDP in 1995. Actual VAT revenue collected fell within this range.

Estimating the Base of the Value-Added Tax (VAT) in Developing Countries: The Problem of Exemptions

Developing countries with VATs typically exempt a large number of goods and services. Following a brief discussion of the rationale for exemptions, this paper presents a formula for the base of a VAT with exemptions. Two basic adjustments must be made to the base without exemptions: subtraction of the value of sales to consumers of exempt industries and addition of intermediate sales of taxable inputs to exempt industries. The paper concludes with a derivation of the elasticity of a VAT with exemptions with respect to aggregate consumption and a discussion of the implications of technological change for the VAT base.