Value Added Tax Rate Research Articles

Reconstructing cities: Stimulating redevelopment through the tax code

The welfare effect of urban renewal policies depends on the size of the external effects and the quantity of the building stock that gets redeveloped. While evidence on the externalities is growing, there is still a need for credibly identified estimates of the responsiveness of redevelopment. I exploit a sharp reduction in the value-added tax (VAT) on construction services for redevelopment in a select group of 32 Belgian cities to fill this gap. The results show that a 15 percentage point reduction in the VAT rate leads to an increase in the amount of demolished and redeveloped floorspace of respectively 36% and 35%.

Article: The EU VAT Rate Reform 2022 from an Environmental Policy Perspective

In addition to introducing fundamental changes to the structures of the European Union (EU) value added tax (VAT) rate regime, the EU VAT rate reform 2022 was aimed at aligning the EU VAT rate system with other EU policies, such as the European Green Deal. The environment-related measures are accordingly meant to incentivize eco-friendly supplies and, conversely, discourage environmentally harmful consumption patterns. Therefore, the EU lawmakers introduced options to apply zero, super reduced and/or reduced VAT rates, and a mandatory phasing-out of preferential VAT treatment respectively. Based on the empirical evidence from earlier VAT rate reforms, the author argues in favour of a differentiated assessment: While the effective VAT increases on the supply of certain environmentally harmful goods should send the intended price signal, the effectiveness and efficiency of VAT reductions as a means of promoting green consumption is highly questionable. In order to achieve the latter objective, public investments, direct financial aid, regulatory and targeted tax-related measures are identified as more appropriate measures. VAT, VAT rates, VAT decreases, VAT reductions, VAT increases, incidence, European Green Deal, environmental policy, VAT policy

Influence of Value Added Tax Revenue on Private Domestic Investment in Developing Countries

The study's overarching goal is to assess the influence of Value Added Tax (VAT) revenue on private domestic investment in emerging countries. The study used a time series research design, and it is a case study of one country, Tanzania. Annual time series data from 1998 to 2020 were used in the study. The data on tax income (VAT) is taken from the Tanzania Revenue Authority website and the Bank of Tanzania, while the data on private domestic investment as Gross fixed capital formation of the private sector as a percentage of GDP is obtained from the World Bank. Following the first tests for heteroscedasticity, multi-collinearity, unit roots, lag length selection, and co-integrating vectors. The long-run and short-run correlations were then computed. The findings demonstrated that in the long run, value added tax is negatively associated to private domestic investment. The analysis showed a negative association between the degree of investment and the value added tax parameter estimates. Even though value added tax generates government revenue, increasing it encourages tax evasion and leads to high prices of goods, putting the burden on low-income earners, reducing disposable income and distorting saving and private domestic investment. The study recommends that governments reduce VAT rates, simplify their tax regimes, address any tax administrative issues, and plug all gaps for tax evasion in order to increase revenue generation and attract private investments. For example, the government should improve an appropriate tax system and implement progressive tax reforms to attract private investors. As the study's findings demonstrated that value added tax has a negative long-term impact on investment, a greater value added tax levied causes higher corporate costs. Governments must also lower VAT rates, simplify their tax regimes, address any tax administrative issues, and close any gaps for tax evasion in order to increase revenue generation and attract private investment. For example, the government should improve an appropriate tax system and implement progressive tax reforms to attract private investors. As the study's findings demonstrated that value added tax has a negative long-term impact on investment, a greater value added tax levied causes higher corporate costs.

The optimal sales threshold separating taxpayers by size in China

This study optimizes the existing sales threshold that separates taxpaying firms by size in China. In the Chinese value-added tax (VAT) system, small-scale taxpayers, whose annual sales are low and who pay a lower tax rate, are distinguished from general taxpayers by a sales threshold. To qualify as small-scale taxpayers and pay less VAT, several general taxpayers who would otherwise exceed the sales threshold tend to reduce production and bunch below the threshold. This bunching pattern is theoretically explained in this study and used to help derive the optimal sales threshold. Furthermore, this study analyzes how the optimal sales threshold varies with changes in administrative and compliance costs and in tax rates. Simulations reveal that optimal sales thresholds are lower than the actual thresholds, indicating that the trade-off between production efficiency and net tax revenue should be considered when determining the sales threshold for VAT in China. • The model explains bunching pattern among Chinese taxpaying firms. • The model determines optimal sales threshold that separates firms by size. • Firms bunch below sales threshold to qualify as small-scale taxpayers and avail a lower VAT rate. • Change in optimal sales threshold with that in administrative and compliance costs and in tax rates are analyzed. • Simulations reveal optimal sales thresholds are lower than actual thresholds in China.

Evolutionary game analysis of three parties in logistics platforms and freight transportation companies’ behavioral strategies for horizontal collaboration considering vehicle capacity utilization

In China, logistics platforms are an effective way to solve vehicle capacity utilization using information sharing. However, most logistics platforms do not possess operational sustainability due to excessive profit-seeking. To address this problem, conflicts of interest among freight transportation participants are discussed using a stakeholder approach. A three-player evolutionary game model (TEGM) is developed to analyze the interactions among freight carriers, freight shippers, and logistics platforms. Then, the asymptotic equilibrium and evolutionary stability strategies of the three-player game are analyzed. The results indicate that a high-level positive network externality is the driving force behind the logistics platform’s “high-level service”. A fairness payment incentive guarantees a “sharing” strategy for freight carriers and shippers. When the high-level positive network externality is limited and lower than a threshold value, there is no stable equilibrium point in the TEGM. A government tax incentive cannot change the freight carriers’ and shippers’ strategy to participate in this horizontal collaboration system, except for the logistics platform’s probability of providing “high-level service”. However, the behavioral strategies of the freight transportation participants can be changed to achieve the sustainability of freight transportation by reducing the value-added tax rate through the logistics platform and increasing the high-level positive network externality of the logistics platform and other participants’ perceived fairness through a payment incentive. Finally, suggestions for regulating the behaviors of freight transportation participants and promoting the sustainability of freight transportation are discussed.

Value-Added Tax and Corporate Tax Burden: Evidence from China’s Value-Added Tax Rate Reform

China introduced the value-added tax (VAT) rate reform in 2017 to reduce the burden on firms and stimulate the economy. This study builds a simple theoretical framework and employs the 2017 VAT rate reform as a quasi-natural experiment to evaluate the effects of the VAT rate reform on the corporate tax burden. We find that the VAT rate reform significantly reduces the corporate total tax burden by 9.1% (an effect mainly driven by the decrease in the VAT burden), while the reform has no significant impact on enterprise income tax burden. Furthermore, the effects of VAT reduction on the corporate tax burden are primarily significant in firms with lower intermediate input ratios, firms facing lower market monopolies, firms from eastern China and firms with high-fixed assets.

To register or not to register for value-added tax? How tax rate changes can influence the decisions of small businesses in South Africa

Purpose Correct registration for the value-added tax (VAT) is a key aspect of tax compliance; it is vital in ensuring adequate tax revenue collection in all countries but particularly in developing countries such as South Africa. Non-registration hinders sufficient tax revenue collection, stifles economic growth and causes unfair competition with formal businesses. The purpose of this study is to determine whether changes in the VAT rate affect the registration decisions of businesses, ultimately impacting upon tax compliance behaviour and tax revenue collection. Design/methodology/approach An online 2 × 2 between-subjects field experiment was conducted, as part of a broader study, to consider compliance with registration requirements by small business entities in South Africa, specifically when there are changes in the VAT rate. Findings Although the study establishes that changes in the VAT rate tend not to have a significant impact on the registration decisions of such taxpayers, it nonetheless indicates that the magnitude of the change in the VAT rate may be influential on registration decisions, whether relating to compulsory or voluntary registration. More particularly, the greater the magnitude of the VAT rate decrease (increase), the more likely it is that taxpayers will register (deregister) for VAT purposes, indicating that the magnitude of changes in the VAT rate do have an impact on VAT registration decisions and therefore on tax compliance more generally. Research limitations/implications Not only does the study add to the limited knowledge available on registration decisions of small businesses, but also gives valuable guidance to policymakers in terms of determining the VAT rate for the country. Originality/value Not only does the study add to the limited knowledge available on registration decisions of small businesses, but it also gives valuable guidance to policymakers in terms of determining the VAT rate for the country.

Impact of Macroeconomic Variables on Value Added Tax in Nepal: An Error Correction Model

This study assesses the impact of macroeconomic variables on Value Added Tax (VAT) revenue in Nepal. VAT plays a great role in the revenue mobilization in Nepal. The reason behind VAT system is that it makes transparency in all kinds of transaction, helps to make the wide area of tax and discourages tax evasion. So it is needless to say that VAT is the most important sources of the government revenue. Data analysis begins with the testing of the unit root of the series to confirm whether the data are stationary or not. Augmented Dicky Fullr unit root test, co-integration test is employed to check the relationship of the variables under study. The results have shown the fact that GDP has positive impact on VAT, CPI and M2 have the positive as well as significant impact on VAT but exchange rate has negative significant impact on VAT. This is the result of OLS method but here model should be further analyzing which ensures the validity of this model. The coefficient of error term has been 3.3 percent meaning that the system corrects its previous period disequilibrium at a speed of 3.3 percent annually. The model is free from hetroskedasticity and residuals are normally distributed which is desirable for the Error Correction Model.

The Effect of a VAT Rate Reduction on Enterprise Costs: Empirical Research Based on China’s VAT Reform Practice

China has implemented a series of tax system reforms to improve the business environment, reduce the burden on enterprises and promote supply-side structural reform. In this article, we focus on the value-added tax (VAT) rate reduction that occurred in 2018 and 2019. We analyse the mechanism of the impact of the value-added tax rate reduction on enterprises’ costs and conduct an empirical test using the DID model and data from Chinese listed companies. The main conclusions are as follows. First, the reduction of VAT rate can significantly reduce the total cost of enterprises. This means that the reduction of VAT rate plays a positive role in reducing enterprise burden, stimulating enterprise vitality and improving enterprise performance. Second, the “cost reduction” effect is more obvious in non-state-owned enterprises than state-owned enterprises. Third, Further heterogeneity analysis shows that the cost reduction effect is more obvious in enterprises that are high-cost, large scale, and those located in eastern China. Small and medium-sized enterprises and those found in the central and western regions failed to significantly reduce operating costs, indicating that they did not benefit fully from a reduced VAT rate, which partly shows that the benefits of VAT tax reduction are not evenly distributed among enterprises. This study can provide a reference for the government to further improve the tax system, optimize the living environment of enterprises, and promote the sustainable development of economy.

ANALISIS PENGARUH KENAIKAN TARIF PPN 11% TERHADAP PENJUALAN PADA PT X

Tax is a mandatory contribution or contribution paid by the people or taxpayers to the state that is coercive and does not receive direct compensation for the benefit of the government and the welfare of the community. There are several types of taxes in Indonesia, such as Income Tax Article 21, Income Tax Article 22, Income Tax Article 23, Income Tax Article 24, Income Tax Article 25, Income Tax Article 26, Income Tax Article 15, Income Tax Article 4 Paragraph 2, and no less popular are VAT and/or PPnBM. Around us, transactions with taxes often occur and are very close to Indonesian citizens where the tax is objective and not subjective, the tax is Value Added Tax (VAT). In this study, the research method used was descriptive quantitative. This study will discuss the problem by describing, calculating, and comparing a situation as well as explaining a situation. The results of the study indicate that an increase in the VAT rate of 11% at PT Riaputra Metalindo has a significant effect on sales of the company's products

Building a tax state in the 21st century: Fiscal pressure, political regimes, and consumption taxation

How can states expand their fiscal capacity in the 21st century? I examine this question by looking at one of the most powerful contemporary fiscal tools at hand – the Value-Added Tax (VAT). Using a novel dataset on VAT rates worldwide since 2000, I argue that fiscal problem pressure can lead to an expanded usage of the VAT. However, this effect depends on the type of political regime. Whereas democracies tend to raise VAT in dire fiscal times, VAT rates in autocracies are more immune to fiscal pressure. Furthermore, I demonstrate that a worse cost-benefit ratio of VAT increases in autocracies can account for this variation. These findings call for a closer investigation of political regime dynamics and fiscal policy-making worldwide.

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.

English

Value added tax (VAT) discouraged consumption, encouraged savings, and generated higher economic growth. Evidence on the actual effectiveness of consumption taxes in changing the consumption patterns and stimulating savings is limited. This study used an ex-post facto research design to assess the impact of VAT on goods and services on the buying behavior of consumers in UAE. It analyzed the changes that consumers in UAE have made in their buying behavior after the imposition of VAT. Data used for the analysis was obtained using a survey questionnaire which examined the consumption patterns of the respondents. The study selected a random sample of 240 respondents from UAE.  Segments of the UAE population have absorbed the additional costs of VAT without changing their spending habits but would likely change them in the future if the VAT rate increased, while lower-income households and those with greater than or equal to 5 were more impacted by VAT. The study is expected to shed light on the impact of VAT on the consumption behavior of households in the UAE and can give some insight to other Gul Cooperation Council countries who have implemented or are about to implement VAT.   Key words: Value-added taxation; consumption taxation; household consumption expenditures; savings; economic growth; empirical investigation, Gul Cooperation Council.

Contribution of Value Added Tax to Gross Domestic Product of Nepal

Value Added Tax (VAT) is a consumption tax, levied at each stage of the consumption chain and born by the final consumer of the product or service. Gross domestic product (GDP) is the standard measure of the value added created through the production of goods and services in a country during a certain period. This study investigated the contribution of VAT to gross domestic product in Nepal from 2001 to 2019 based on empirical evidences. To meet this objective, time series macro economic data of GDP and VAT were used. Data were collected through the economic survey from Ministry of Finance. Ordinary Least Square technique was employed to test the hypotheses formulated. The result shows that VAT contributes significantly to GDP. During the periods under review, the growth rate of VAT was 17.42% on average and the average ratio of VAT revenue to that of GDP was 4.38%. The findings also reveal that there is the existence of both positive and strong relationship between VAT and GDP. Hence, Government of Nepal should search for the way to boost the revenue from VAT by mostly supporting with the configurations of networks among all the agencies of government and taxing authorities of the federal level, each province and local bodies in order to meet the growth and to facilitate public services for the country.

Impact of the Reduction of VAT Rate on Southeast Coastal Real Estate Enterprises

This paper takes the southeast coastal real estate listed enterprises that have been at the forefront of China’s reform for many years as the research object. Through theoretical analysis and descriptive statistical analysis, it studies the impact of the reduction of VAT (value-added tax) rate in 2019 on the southeast coastal listed real estate enterprises from the perspectives of sales revenue, costs, tax burden, profit, and cash flow. The overall operating tax rate has shown a volatile downward trend; the average operating income level has shown a volatile upward trend; the purchase cost has decreased slightly and the change was not significant; the total profits of enterprises have shown a cyclical upward trend. Due to the impact of the real estate purchase restriction policy and financing environment in recent years, the reduction of tax rate has an effective but not significant impact on the enterprise cash flow. Overall, the tax rate reduction still has a positive impact on enterprises. Combined with the problems in the process of policy implementation, this paper puts forward that those enterprises should make scientific and reasonable tax planning, pay attention to the management of purchase and sales contracts and the mode of cooperation with upstream enterprises, regulate taxation to reduce tax-related risks, improve the management level of enterprises, and establish an industry finance integration system. At the national policy level, there is limited room and effect for the reduction of the VAT rate, and more preferential tax relief policies should be given directly, not limited to VAT, but can be extended to corporate income tax. In this way, that could improve the effectiveness of the tax reduction policy in the southeast coastal real estate industry and provide a reference for relevant industries in other regions to solve similar problems.

Reassessing the regressivity of the VAT

AbstractThis paper reassesses the often‐made conclusion that the value‐added tax (VAT) is regressive, drawing on tax microsimulation models constructed for an unprecedented 27 OECD countries. The paper first considers the competing methodological approaches used in previous distributional studies, highlighting the impact of savings patterns on cross‐sectional analysis when VAT burdens are measured relative to income. It is argued that measuring VAT burdens relative to expenditure – thereby removing the influence of savings – can be expected to provide a more reliable picture of the distributional impact of the VAT. On this basis, the VAT is found to be either roughly proportional or slightly progressive in most of the 27 OECD countries examined. Nevertheless, the results for a small number of countries highlight that broad‐based VAT systems that have few reduced VAT rates or exemptions can produce a small degree of regressivity. Results also show that even a roughly proportional VAT can still have significant equity implications for the poor – potentially pushing some households into poverty. This emphasises the importance of ensuring the progressivity of the tax‐benefit system as a whole in order to compensate poor households for the loss in purchasing power from paying VAT.

Public Awareness Towards Value Added Tax (VAT) System in Hetauda Sub-metropolitan City Area

Value added tax (VAT) is indirect sources of revenue collection of nation. It has been the most essential choice like our developing countries, Nepal. Which leads to revenue enhancement and sustainable economic development. As VAT was an emerging concept in Nepal, a comprehensive taxpayer education program was launched to impart knowledge regarding the various aspects of VAT to parliamentarians, industrialists, businessmen, consumers as well related society. The study used descriptive and survey research design. Data were collected through questionnaires. Statistical tools were used to make a proper analysis. It is found that 20% businessmen and 33.33% consumers are not aware that the Government of Nepal is levying VAT on all kind of products, 36% consumers are not aware of the fact that you pay VAT whenever you purchase any product, 88 % of the total respondents knowledge on earning from VAT is a major source of revenue for Government, only 44 % response of respondents are in favor of billing system, 33.33% consumer are not aware about existing rate of VAT in Nepal, 44% consumers specify the other problem in the present VAT implementation except VAT collection ,VAT refund and registration. Most of them ask for tax invoice to get the authenticity of sellers. VAT must be successful and this largely depends upon the public awareness, honesty, faith and morality of tax officials and the business community. There is a need for willpower and action. It is also found that public awareness program and tax education play prime role to increase the VAT revenue in Nepal. The finding of this study is majority of Tax expert and businessmen are aware about VAT system but the training and awareness program is essential.

Is carbon pricing regressive? Insights from a recursive-dynamic CGE analysis with heterogeneous households for Austria

We explore the macroeconomic and distributional impacts of unilateral carbon pricing in Austrian economic sectors, which are not covered by the EU emission trading scheme ETS, under various assumptions of revenue usage. We use a recursive-dynamic computable general equilibrium model with twelve groups of private households, differentiated by income quartile and location of residence. Pricing of non-ETS CO2 emissions without any targeted compensation of households turns out to be progressive (when measured in equivalent variation, or welfare) with households living in the periphery being affected the most. This outcome is explained by the dominating progressive factor income effect, which works against regressive consumer price impacts. Considering the positive contribution to welfare from increased public goods provision, low-income households are even better off than without carbon pricing. We compare the revenue usage options ‘no targeted compensation’ with either unconditional or revenue-neutral ‘eco-bonus per capita payments’ as well as revenue-neutral cuts in either ‘labor tax rates’ or ‘value added tax rates.’ We discuss our results from a Utilitarian, Rawlsian and polarization-averse equity perspective. Applying equal weights to the criteria ‘environmental effectiveness’, ‘cost effectiveness’, ‘public budget’ and ‘welfare’, Rawlsian decision makers would prefer the no targeted compensation option. Otherwise, the revenue usage option of revenue-neutral cuts in labor tax rates balance best investigated multiple criteria.

How Taxpayers Behavior takes Advantage in Tax Incentives Policy

Tax incentives Preliminary Refund of Value Added Tax (VAT) is one of the government's tax relaxation facilities in the context of national economic recovery. This study aims to observe the effect of the incentive for the Preliminary Return of VAT on taxpayer behavior in dealing with this tax incentive policy. This is qualitative research using descriptive approach. The data were collected by in-depth interviews with 38 taxpayers in the West Java I Directorate Jenderal of Taxes (DJP) Regional Office and Banten area, which were then processed using the nVivo application. The result shows that several factors contribute to taxpayers' behavior to propose the Tax Incentives Preliminary Refund of VAT. The factors are taxpayers more require tax incentives policy to reduce the tax rate of VAT, or there will not be an examination. The Implication of this research is how the Directorate Jenderal of Taxes (DJP) can arrange other tax incentive policies that can give more easiness to the taxpayers in the future. This research is limited only to the West Java I DJP Regional Offices and Banten. Also, the number of taxpayers interviewed is only a few due to pandemic, so it does not represent the field's facts.

Is taxation being effectively used to promote public transport in Europe?

Public transport is a pivotal utility in increasing the long-term sustainability of cities. Consequently, there has been a growing interest in promoting a sustainable modal shift that reduces dependence on private vehicle use. This strategy has involved several specific actions, among them employing price differentiation between the two substitutes considered in this research – public transport and private cars. Governments can influence fares in different ways. However, fiscal policy governing applicable taxes is one that is often neglected in the literature. This paper investigates the relationship between the market share of public transport and taxation – in particular, value added tax (VAT), which is levied on three main products: public transport fares, fuel, and vehicle ownership. The results show that taxes matter, but not all taxes are determinant. A lower VAT rate on public transport fares and a higher tax rate on vehicle ownership can lead to an increase in public transport's market share. Taxing car utilization through VAT on fuel does appear to be significant.