Value Added Tax Rate Research Articles

VAT rate cut and corporate maturity mismatch: Evidence from China's VAT rate reform

This paper explores the causal link between value-added tax (VAT) and corporate maturity mismatch between investment and financing, using China's VAT rate reform, which lowered VAT rates and was enacted on July 1st, 2017, as a quasi-natural experiment. The results show that the VAT rate reform apparently reduces the degree of corporate maturity mismatch. This is because, on the financing side, the reform improves corporate profitability and thus reduces short-term debts, while on the investment side, the reform has no impact on firm investment. Furthermore, the interaction effects of VAT rate reform and other tax incentives on investment are significantly negative, and short-term debts are riskier than long-term ones, strengthening the above mechanisms. We also find that market competition enhances the reform effects on corporate profitability and corporate maturity mismatch, shedding light on the role of market competition in shaping effect. Finally, we find that the reform effects are primarily significant for non-state-owned enterprises, firms in capital-intensive industries, and firms registered in middle and western China. These findings enrich the understanding of the economic consequences of VAT rate reform and help the government introduce better policies to stimulate investment and control financial risks.

Tax Aggressiveness and Corporate Financialization in Brazil

Objective: This study investigates the relationship between tax aggressiveness and corporate financialization in companies listed on Brazil's B3 Stock Exchange from 2009 to 2022.
 Method: We employed a panel linear regression model, adjusting for fixed effects related to individual companies and specific years. We used metrics such as abnormal book tax differences (BTDA), effective tax rate (ETR), and Comprehensive Value-Added Tax Rate (CVATR) to measure tax aggressiveness.
 Results: Our findings show a positive correlation between tax aggressiveness and corporate financialization. Firms employing aggressive tax strategies exhibited increased financialization. For robustness, dummy variables targeting aggressively taxed firms were introduced, confirming the initial relationship. CVATR emerged as a particularly effective metric in the Brazilian context due to its complex tax structure.
 Originality/Relevance: This study is pioneering in exploring the nexus between tax aggressiveness and corporate financialization in Brazil, contributing valuable insights for local researchers, investors, policymakers, and financial analysts.
 Theoretical/Methodological Contributions: Our research introduces innovative approaches for measuring financial assets tailored to Brazil's unique market conditions. It also enriches the current body of literature by confirming CVATR as an effective metric for capturing tax aggressiveness in Brazil.

The determinants of compliance VAT gap

PurposeThis paper aims to analyze the potential variables explaining the compliance value added tax (VAT) gap, which basically represents an estimate of the unpaid VAT in the economy. A major component of compliance VAT Gap is represented by tax fraud; there exist other causes too, like insolvencies, bankruptcies, optimizations practices and maladministration. The objective of our paper is to revisit the main determinants of the VAT compliance gap for the European Union (EU)-27 member states. Using econometric modeling, our study identifies the relationship between the VAT gap and various determinants of it.Design/methodology/approachOur work focuses on the shadow economy, final consumption, VAT revenues, standard VAT rates, differences between the standard and reduced rates, economic prosperity, press freedom, political stability and others, as determinants of European VAT compliance gaps, for the 2005–2020 time interval. The methods include panel data analysis through simple and multiple regression modeling, the combinatorial approach, fixed and random effects.FindingsOur study validates the direct impact of shadow economy and the indirect impact of VAT revenues, economic prosperity and press freedom, upon VAT compliance gaps. Upon subsampling of EU member states within old and new ones, our results estimate a larger positive impact of shadow economy upon old member states, compared to new ones.Practical implicationsThe policy implications include leverage effects of governments acting upon a reduction in shadow economy phenomena and boosts of economic development, political stability and press freedom, in order to attain the contraction of compliance VAT gaps.Originality/valueOur paper sheds light in a poorly explored scientific area, that of the determinants of VAT gap, especially in relationship with financial and economic crime phenomena.

Measuring quality-adjusted price changes on the mobile market: a case study from Hungary

PurposeThis study aims to estimate the quality-adjusted changes in residential mobile consumer prices by controlling for the changes in the relevant service characteristics and quality, in a case study on Hungary between 2015 and 2021; compare the results with changes measured by the traditionally calculated official telecommunications price index of the Statistical Office; and discuss separating the hedonic price changes from the effect of a specific government intervention that occurred in Hungary, namely, the significant reduction in the value added tax rate (VAT) levied on internet services.Design/methodology/approachSince the price of commercial mobile offers does not directly reflect the continuous improvements in service characteristics and functionalities over time, the price changes need to be adjusted for changes in quality. The authors use hedonic regression analysis to address this issue.FindingsThe results show significant hedonic price changes over the observed seven-year period of over 30%, which turns out to be primarily driven by the significant developments in the comprising service characteristics and not the VAT policy change.Originality/valueThis paper contributes to the literature on hedonic price analyses on complex telecommunications service plans and enhances this methodology by using weights and analysing the content-related features of the mobile packages.

Measurement of Value Added Tax (VAT) Efficiency of Nepal

VAT is indirect tax, becoming major sources of Government revenue worldwide. VAT is paid in an effort to uplift the tax collection efficiency in order to recover their budget deficit and enhance the economic stability. But the efficiency of VAT collection has played negative roles like standard VAT rate, threshold, list of tax exempted or zero rate goods and services, tax evasion, political commitment, stable government etc. This research has taken secondary data from Government’s authentic publication from 2010/011 to 2020/021. All these data were analyzed on the helps of trend analysis, VAT to GDP ratio, VAT efficiency ratio and C-efficiency ratio. All the indicators have been found positive. The collection of VAT and GDP appear in increasing trend. The increasing trend of VAT is higher than GDP. The VAT to GDP ratio reaches from 3.95 to 11.84, VAT efficiency ratio extends from 30.38 to 91.12 and average C-efficiency ratio of the study period 64.7. The studied indicators proved that VAT has improving collection efficiency, increasing trend of collection and improving in role on GDP on Nepalese economy. From all these, VAT should be more income generative in the future and help to minimize the budget deficiency of Nepal Government.

Effect Of Imports, Industrial Sector, And Service Sector On Value-Added Tax With Regulatory Quality As A Moderating Variable

State revenue to organize its government is mostly collected by taxation as the main source. In its implementation, taxes are imposed directly and indirectly. The indirect tax that plays a role in the structure of state revenue is Value Added Tax (VAT). VAT is imposed on goods or services consumed in an area based on a set rate. VAT imposition of the highest rates on average is imposed in European countries. There are 11 European countries with the highest VAT rates, which are the object of research, namely Hungary, Croatia, Denmark, Norway, Sweden, Greece, Iceland, Finland, Ireland, Poland, and Portugal. This study will discuss the effect of value added on the industrial and service sectors, which are the main sectors in the 11 countries as well as the effect of international trade activities, namely imports, on VAT revenues with a moderation of the regulatory quality index. The results show that the imported variable and the added value of the industrial and service sectors, both before and after interaction with the moderating variable of the regulatory quality index, significantly influence VAT acceptance. For the partial results, before moderation with the regulatory quality index, imports don't significantly affect VAT revenue. In contrast, the industrial and service sectors have significant negative effects on VAT revenue. Furthermore, after interacting with regulatory quality variables, imports, value added in the industrial and service sectors have a significant positive influence on VAT revenue. This shows that the moderating variable of the regulatory quality index plays a role in strengthening the relationship between the independent and dependent variables.

The impact of tax reduction on enterprises' financialization-A quasi-natural experiment based on the reduction of VAT rate.

This study examines the influence of the reduction in value-added tax (VAT) rates in China during 2018 and 2019 on corporate financialization. By employing a difference-in-differences model and utilizing data from Chinese A-share listed companies between 2017 and 2020, we assess the effects of tax reduction policies. Moreover, it achieves this outcome through three main pathways: alleviating financing constraints, boosting fixed asset investment, and weakening corporate financial arbitrage motives. Further analysis demonstrates that the inhibitory effect of VAT rate reduction on corporate financialization is more pronounced for non-manufacturing companies, businesses reliant on the basic tax rate as their primary revenue source, companies with low intermediate input rates, and those with a strong ability to shift the tax burden. Additionally, debt financing costs play a crucial role in moderating the relationship between tax reduction policies and corporate financialization. The conclusions drawn from this study provide valuable empirical evidence that can contribute to the refinement of VAT reduction policies and the prevention and resolution of financialization at the micro-level.

Impact of Changes in Value Added Tax Rate on Revenue Production, Perspective of Government, Business, and Individuals: A Case of Fiji Islands

Purpose: The primary objective of this study is to investigate the impact of changes in the Value Added Tax rate on revenue production in Fiji. The study aims to explore how changes in value-added tax rate affect the government, businesses, and individuals in the country. Methodology: A secondary research method was utilized to gather data. Data is collected from multiple sources, including government statistics, existing literature, and survey reports. The study then employs descriptive, narrative, and qualitative analysis techniques to interpret the collected data. Findings: The findings of the study reveal that changes in value-added tax rates have both positive and negative impacts on key stakeholders, namely the government, businesses, and individuals. The descriptive analysis provides an explanation of these results from the perspectives of these stakeholders. Practical Contribution: The study offers insights to stakeholders, including government, businesses, and individuals, on how to implement effective strategies to mitigate financial risks associated with changes in VAT rates. This information can be valuable in decision-making and financial planning. The study provides strategies for regulators and standard setters to reform the tax change reporting model. This can lead to more efficient and transparent tax policy implementation, potentially benefiting the broader economy. Theoretical Contribution: The research contributes to the literature on Value Added Tax by providing an empirical study. This contributes to a deeper understanding of how VAT rate changes impact the different stakeholders, which can be valuable for both researchers and policymakers. The study introduces a strategic model that offers a holistic understanding of the interconnected factors affecting changes in tax policy. This model can serve as a framework for analyzing and formulating tax policies in Fiji, as well as potentially being applicable in other contexts. Study Limitations – Limited sample size.

Terrorism and economic policy responses in Tunisia

This paper uses a recursive dynamic general equilibrium model to study the impact of the 2015 terrorist attacks in Tunisia. It examines the government’s fiscal responses: increased security spending and the reduction of the tourism sector’s value-added tax (VAT) rate. It finds that these responses accounted for a significant share of the attacks’ total cost. The results also underscore the need for a comprehensive approach to addressing the economic consequences of terrorism. Increased security spending mitigates future risks but does not directly help the affected sector. Direct support to the sector by reducing VAT has an immediate and positive impact.

Taxing reproduction: the full transfer cost of rearing children in Europe.

What are the intergenerational resource transfer contributions of parents and non-parents in Europe? Using National Transfer Accounts and National Time Transfer Accounts for 12 countries around 2010, we go beyond public transfers (net taxes) to also value two statistically much less visible transfers in the family realm: of market goods and of unpaid household labour (time). Non-parents contribute almost exclusively to public transfers. But parents additionally provide still larger private transfers: mothers mainly time, fathers mainly market goods. Estimating transfer stocks over the working life, the average parental/non-parental contribution ratio in Europe flips from 0.73 (public transfers alone) to 2.66 (all three transfers combined). The highest combined parental/non-parental contribution ratios are in Sweden and Finland. The metaphorical tax rates implicitly imposed thereby on rearing children in Europe are multiples of the value-added tax rates in place on consumption goods. Unveiling the sheer magnitude of these invisible transfer asymmetries carries multiple implications for policy debates. For instance, it raises the question whether ageing European societies unwittingly tax, rather than subsidise, their own reproduction. Family friendly policy models, such as the Nordic welfare states, do not mitigate this effect. They help parents work, but do not lower the implicit tax parents pay.

Does the value-added tax reduction policy promote a firm’s green innovation? Evidence from China

ABSTRACT Based on the quasi-natural experiment of the Notice on Policies Related to the Simplified Value-added Tax Rate in 2017, this paper constructs a difference-in-difference model to shed light on the impact of the value-added tax reduction policy on a firm’s green innovation and its potential mechanism. The results reveal that after the implementation of the value-added tax reduction policy, the green innovation level of firms affected by the policy shock has significantly improved, and this conclusion remains consistent after a series of robustness tests. From the type of firms’ green innovation, the enforcement of the value-added tax reduction policy spurs firms’ substantive green innovation, but has limited impact on firms’ strategic green innovation. The mechanism test finds that easing financing constraints is an important channel for tax reduction policies to affect firms’ green innovation activities. In addition, the analysis indicates that the positive effect of the value-added tax reduction policy on green innovation is more pronounced among firms with more government innovation subsidies, stronger human capital, and higher capital intensity.

China's value-added tax policy and intertemporal optimal assets allocation of enterprises--Based on the dual perspectives of VAT input refund and VAT rate.

The article sought to detect the impact of the value-added tax (VAT) policy on the enterprises' asset allocation from the dual perspectives of the VAT input refund and the VAT rate. Based on the influenced mechanism of the VAT input refund and the tax burden effect (and the price effect) caused by the VAT rate, enterprises' intertemporal optimal asset allocation models are constructed under the states of adopting the VAT input refund and maintaining the theoretical tax (non-)neutrality of VAT. When VAT rates of the general taxpayers are predicted to be reduced, we also use China's manufacturing and economic data to simulate specific cases to verify propositions under different states. The results show that: (1) When the VAT output tax rate decreases: if returns to scale are diminishing, enterprises will increase the number of productive material assets and labor and reduce financial assets. (2) When the VAT input tax rate reduces: under the state of adopting the VAT input refund and maintaining the theoretical tax (non-)neutrality of VAT, if returns to scale are decreasing, enterprises will reduce the number of productive material assets and labor and increase financial assets. Under the state of adopting the VAT input refund and maintaining the theoretical tax neutrality of VAT, if returns to scale are increasing and the expected rate of return of financial assets is lower than the additional tax rate, or the enterprise has diminishing returns to scale and the expected rate of return of financial assets is higher than the additional tax rate, enterprises will increase the number of productive material assets and labor. (3) When VAT output and input tax rates reduce simultaneously: under the state of adopting the VAT input refund and maintaining the theoretical tax neutrality of VAT, if returns to scale are increasing and the expected return rate of financial assets is higher than the additional tax rate, the enterprise will reduce the number of productive material assets and labor and increase financial assets. Under the diminishing returns to scale in China's national economy, the research conclusions endorse the rational necessity of the VAT policy change-VAT rate reduction to develop the entity economy and provide a reference for enterprises to make asset allocation decisions. The conclusions also provide possible changes in VAT policy for different countries according to their actual economic conditions.

Delaying the Implementation of Carbon Tax in Indonesia: A Critical Review of the Harmonization of Tax Regulations

<em>The implementation of carbon tax has been postponed twice by the government based on the mandate of Articles 13 and 17 of Law No. 7/2021 on Harmonization of Tax Regulations. However, it is unclear how long these delays will last, raising questions about compliance with existing regulations. The postponement of carbon tax implementation based on existing regulations in the Harmonization of Tax Regulations raises concerns regarding compliance with the mandate of the law. The reason for the delay given by the government also needs to be further evaluated to ensure policy consistency and transparency in decision-making. This research aims to analyze the postponement of carbon tax implementation based on the regulations listed in the Taxation Regulations Harmonization Act, as well as identify the reasons for the postponement given by the government. This research method uses normative juridical, qualitative methods by reviewing literature, related rules, and regulations,Reasons for the delay given by the government include caution against a fragile economic recovery and a spike in energy prices. However, these reasons were also used to postpone the increase in the value-added tax (PPN) rate, potentially raising questions about compliance with regulations.</em>

VAT rate cut and enterprise deleveraging: Evidence from China

‘Deleveraging’ is an important objective of China’s economic macro-control. Tax cuts are an important measure to promote enterprises’ deleveraging and reduce operating costs and financial risks. This study employs the 2018 value-added tax (VAT) rate reduction by the Chinese government in a quasi-natural experiment with financial data from listed companies from 2016 to 2019 as research samples, applying the difference-in-differences (DID) model to analyse the policy’s deleveraging effect. The results show that the VAT rate reduction significantly reduced the leverage and current debt ratios of enterprises in the treatment group but had no significant effect on long-term debt ratio. Further investigation shows that the VAT rate reduction’s deleveraging effect was more significant for state-owned, highly leveraged companies, small and medium-sized enterprises and companies in eastern China. In western China, the total leverage ratio of enterprises experienced no significant change, current debt ratio increased, long-term debt ratio decreased and financial risks and financing constraints further intensified. This study’s conclusions have significance as a reference for China and other developing countries to improve tax reduction policies, stimulate enterprise vitality, reduce enterprise financial risks and effectively navigate the economic recession.

ANALISIS PERHITUNGAN PAJAK PERTAMBAHAN NILAI SEBELUM DAN SESUDAH UNDANG-UNDANG HARMONISASI PERPAJAKAN NOMOR 7 TAHUN 2021 GUNA MENENTUKAN PAJAK PERTAMBAHAN NILAI TERUTANG

The government carry out economic recovery in various sectors during Coronavirus Disease of 2019 (Covid-19) pandemic, which one is tax sector. Tax as a crucial role holder in state revenue requires the government to increase state revenue targets and make taxpayers feel fair with the stipulation of HPP Law No. 7 of 2021 dated 29 October 2021. The update that has occurred is the change in the rate of imposition of Value Added Tax (VAT) from 10 % to 11% as of April 2022 which will affect the Value Added Tax Payable.The purpose of this research to find out the calculation of VAT before and after the HPP Law No. 7 of 2021 to determine the VAT payable. Comparing VAT rates based on Law No. 42 of 2009 with HPP Law No. 7 of 2021 using quantitative descriptive method by processing sales and purchase data records of CV ELRAYA for January-July 2022 into tariff formula VAT before and after the HPP Law No 7 of 2021 and the formula for VAT payable. The conclusion is the VAT payable that must be borne by CV ELRAYA is Rp. 49,682,036, reported on the correction SPT and deposited at the Pratama Kediri Tax Service Office, with this conclusion advice can be given for tax planning in order to save and minimize the tax expense in the next period.

Dataset of companies' profitability, government debt, financial statements' key indicators and earnings in an emerging market: Developing a panel and time series database of value-added tax rate increase impacts.

Company profitability is a crucial indicator that can be used for developing and sustaining trust in accounting information and, thus, inefficient capital markets. Companies with good financial statements' key indicators have a more extensive customer base and can diversify their revenue streams, making them more resilient to economic downturns. Assembling and managing taxes is a critical underpinning to protecting a country's financial intensity and developing a country's tax-system. VAT is a primary source of financial gain in developing nations, which differs from economic income in developed countries, where economic income is primarily derived from tax income. In emerging economies, the existing practice requires firms to effectively and efficiently publish annual-reports and indicators on market-websites, as users rely heavily on timely-information and need it to make decisions. However, these practices fell short of expectations, requiring more research. These variables are crucial for most accounting/economics/taxation research models and the lack of easily attainable data in well-known databases (e.g., ARGAAM; DataStream). This article is primarily a dataset for analysing taxation, performance variables, and key financial-statement indicators. The data describes the raw, combined, and filtered information at the company level, such as company profit and government debt in Saudi Arabia. It combines a firm-level panel dataset sample of company profit that its measures scaled by total assets and include: earnings before interest, taxes, decrease and amortisation, earnings before interest and taxes, earnings after taxes and earnings before taxes-moreover, the time series dataset sample of 11 financial statements' key indicators. The dataset results from 494 company-year observations (226-panel data sample and 268-time series data sample) from 2019 to 2020. Data has been collected from taxation reports, corporate annual reports, ARGAAM database, FinBox database, the Trading Economics database and the Tadawul-market website in Saudi Arabia.

Analisis Restitusi Pajak Pertambahan Nilai dan Kenaikan Tarif Pajak Pertambahan Nilai 11 % pada KPP Pratama Palembang Ilir Barat

This study aims to determine and analyze the application of value added tax refunds, increases in value added tax rates and the relationship between value added tax refunds and increases in value added tax rates. This research was conducted at the Palembang Ilir Barat Primary Tax Service Office. In this study the research approach used was descriptive and the type of data used was qualitative. Sources of data used in this study are primary and secondary data with data collection techniques including documentation and interviews. The results of this study indicate that KPP Pratama Palembang Ilir Barat in implementing the 11% value added tax refund is in accordance with the provisions of the Directorate General of Taxes.

Do VAT cuts help stabilize employment? Evidence from China’s VAT rate reform

This paper develops a simple model to study the influence of China’s value-added tax (VAT) rate reform on employment. The model delivers important information about how monopoly and unskilled labor enhances the substitution of non-labor factors for labor. Taking China’s VAT rate reform as a quasi-natural experiment, this paper examines the model’s predictions with a difference-in-differences (DID) approach. The results suggest that China’s VAT rate reform has a negative employment effect and that the decrease in the relative price of non-labor inputs to labor serves as an important channel through which non-labor factors squeeze labor out. Reducing the degree of market monopoly and improving the skill level of labor can effectively mitigate the adverse impact of the reform on employment.

Problems of value added tax management and the anti-crisis measures to address them: Optimizing rates and improving VAT administration

Subject. This article analyzes the economic relations arising from the management of value added tax in the Russian Federation. Objectives. Based on the identified problems in the field of value added tax management, the article aims to propose anti-crisis measures to address them. Methods. For the study, I used a combination of abstract-logical, case study, and statistical analysis methods. Results. The article presents the results of a study of problems related to the optimization of value added tax rates and the improvement of VAT administration. It predicts the level of VAT collection in Russia and the proportion of entities with violations based on the results of regulatory and supervisory measures for 2022–2024. The article also defines the main schemes for the withdrawal of Russian companies from VAT payment, formulates the imperatives imposed by the Russian authorities on taxation measures, and presents certain proposals for solving the identified problems in the administration of VAT. Conclusions. The proposed measures will help raise federal budget revenues and establish a more equitable mechanism for levying VAT.

Performance of Vat System in Tanzania Since Enactment of The Vat Act in 2014

The 2014 Value Added Tax (VAT) reforms focused on reduction of the base alterations and broadening the tax base and also dealt with several legal drafting issues to enhance the effectiveness of the new VAT law with hopes of enhancing revenue collection. The objective of this article is to assess the performance of VAT system in Tanzania in terms of tax payer’s registration and collection efficiencies. This study adopted a quantitative paradigm whereby data were analysed quantitatively through descriptive statistics and ratio analysis for efficiency measurement. Only secondary data were used in this study. The sources of data were reports from the Tanzania Revenue Authority (TRA), the National Bureau of Statistics (NBS), the World Bank (WB), IMF and peer-reviewed journal articles on relevant subject matters. The study revealed a total of 4,575 taxpayers who were eligible to be registered for VAT but who were not captured by the VAT tax system by January 2022. As a result, the government is estimated to have lost about TZS 23,350.09 billion during that period. Furthermore, it was found that the contribution of VAT to GDP is 3.6 per cent which is below the country’s expectation threshold of 6 per cent annually and is below the East African Community member states’ average of 4.4 per cent. Both the VAT Efficiency and C-efficiency ratios were not performing well; their averages were 21.9 and 20.7 per cent respectively, below the EAC regional average of 25 per cent. It is recommended to the government to increase VAT registration threshold and reduce the VAT rate. TRA is urged to decentralize the registration of VAT taxpayers to regions so as to improve compliance and administrative efficiency. The study further recommends to TRA to audit the 4,575 taxpayers whose turnovers are above TZS 100 million but are not yet registered and captured within the VAT tax net.