Value Added Tax System Research Articles

The impact of new VAT enforcement on financial performance: Evidence from Saudi Arabia non-financial listed companies using the event study and ARMA model

This paper examines the influence of the new 15 % Value Added Tax (VAT) enforcement on non-financial listed companies in Saudi Arabia. By comparing financial data from 2019, before the VAT implementation and the COVID-19 pandemic, with data from 2020, during both the VAT increase and the pandemic, the research aims to uncover the consequences of this tax policy change. Utilizing charts, tables, and an event study analysis approach with the Autoregressive Moving Average (ARMA) model, we investigated key financial indicators such as Shareholders' Equity (SE), Total Income (TI), Total Revenues (TR), Net Income (NI), Total Expenses (TE), Other Changes in Operating Activity (COA), and Cash at the End of the Period (CEP). The findings reveal significant financial impacts, highlighting companies' challenges due to the increased tax burden. Shareholders' Equity dropped from an average of 11.55 million to 4.57 million, and Total Income and Total Revenues decreased from approximately 1.73 million to 316,234 and from 1.95 million to 331,605, respectively. Net Income sharply declined from 406,109 to 74,624, and Total Expenses decreased from about 1.18 million to 223,495. Other Changes in Operating Activity shifted from a negative mean of −168,936 to a positive 523,520, and Cash at the End of the Period fell from 1.99 million to 666,663. These results suggest that the VAT increase has significantly strained companies' financial performance, emphasizing the need to consider such tax reforms carefully, particularly in developing countries. The study concludes that while the VAT increase aims to enhance government revenues, it imposes substantial financial strain on companies, potentially leading to long-term economic repercussions. Policymakers should consider these implications and implement practical measures to optimize the VAT system and support business resilience in the face of such reforms.

The effect of enterprise quality management on innovation incentives in enterprises —— based on the reform of China's value-added tax system

This article will analyze the incentive effect of the value-added tax rate reduction policy on enterprise innovation from the perspective of enterprise quality management. The research results indicate that: (1) the reduction of value-added tax rate has an incentive effect on the innovation activities of enterprises; (2) There is a positive moderating effect of enterprise quality management on the reduction of value-added tax rate and the innovation and research and development activities of enterprises; (3) The reduction of value-added tax rate has a more significant incentive effect on innovation in the eastern region of China, state-owned enterprises, and relatively larger enterprises.

Towards true prices in food retailing: the value added tax as an instrument transforming agri-food systems

AbstractCurrent crises (i.e., climate crisis, COVID-19 pandemic, Russian invasion of Ukraine, and the resulting energy and food shortages) indicate the need for robust, and sustainable supply chains with regional food production and farmland to secure food supply in the European Union (EU). Recent research shows that organic food is more resilient to supply chain disruptions and price fluctuations. In this context, we examine an approach for the sustainable and resilient transformation of agri-food networks: can an adaptation of value added tax (VAT) levels work as a financial incentive to amplify resilient agricultural practices and sustainable dietary patterns? Within the setting of the amendment of the European framework directive on the use of VAT in 2022, we model the effects of adapting the current German VAT system by (1) reducing VAT on organic vegetarian food to 0% and (2) raising VAT on conventional meat and fish to 19%. Based on historical data on organic sales shares and price elasticities, we project sales shares differentiated by product group for each scenario. Then, we calculate expected tax revenues, changes in consumption patterns, and arising total external climate costs in Germany for both scenarios. Our results show that the overall consumption share of organic food would increase by 21.83% due to the modeled VAT reform compared to the status quo. Despite the VAT reduction to 0% on organic vegetarian products, the measure would yield €2.04 billion in extra tax revenues in Germany per year due to the increased taxation on conventional meat products. We find that annual environmental costs of €5.31 billion can be avoided as a result of lower external climate costs of organic and vegetarian food. Therefore, adjusting VAT rates in the food market can be a political instrument to drive organic food consumption and reduce animal livestock. This supports re-territorialization of agriculture and a more sustainable and resilient European food supply.

THE STUDY ОF VАLUE-АDDED TАX: KNОWLEDGE FRОM THE EU VАT EXPERIENСE АND UZBEKISTAN'S VАT SYSTEM

The complex structure of the Value Added Tax (VAT) system in the European Union is captured in the abstract. It describes important elements including taxable transactions, standard rates, and the credit-invoice method. The historical shift from fiscal borders to administrative restrictions is discussed, highlighting the need to strike a careful balance between a consumption tax based on destination and a single internal market. In business-to-business transactions, mechanisms like the reverse charge technique and standardized identifying numbers are implemented. The abstract makes mention of several new difficulties that may arise, such as the complexity of place-of-taxation laws and the possibility of false refund claims. All in all, it gives a clear synopsis of the complex EU VAT system, including information on its composition and changing dynamics.

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.

Research on the Settlement of Land Value Added Tax in J Real Estate Company

In recent years, with the recovery of the real estate market economy, China's housing prices have been consistently high, partly due to the impact of supply and demand, and partly due to the high tax costs of real estate in China. When it comes to the cost of real estate tax in our country, we have to mention the tax type that accounts for a large proportion: land value-added tax. The collection of land value-added tax in China adopts a "liquidation system". However, due to certain deficiencies in the land value-added tax system and incomplete related systems, complex collection methods for land value-added tax liquidation, unclear tax elements, and great difficulty, the internal management of real estate enterprises often cannot fully grasp the key points and difficulties of land value-added tax liquidation, which greatly increases the risk of land value-added tax involvement in real estate enterprises. On the basis of clarifying the development context of land value-added tax, combined with the actual situation of land value-added tax liquidation of J Real Estate Company and the analysis of the land value-added tax liquidation process, it is found that the problems of J Real Estate Company include lack of attention to land value-added tax liquidation, lack of financial daily management, and insufficient utilization of land value-added tax liquidation benefits. Through summarizing and researching relevant issues, it is proposed that J Real Estate Company should always pay attention to policy changes, place financial and tax personnel at the forefront of project development, and strengthen daily financial management. On the basis of studying the theory of land value-added tax liquidation and combining with practical liquidation cases, this article considers and studies how Chinese real estate enterprises should respond to the tax risks of land value-added tax. The aim is to encourage Chinese real estate enterprises to actively explore strategies to improve their ability to resist tax risks and methods to enhance their internal management capabilities of land value-added tax, help real estate enterprises control tax costs, and ultimately promote the healthy and rapid development of real estate enterprises.

The boundary between digital goods and E-services in cross-border E-commerce and implication for non-discrimination under the WTO system

Abstract One of the biggest challenges of implementing value-added tax (VAT) collection on cross-border digital goods and services is the compliance with World Trade Organization (WTO) obligations. The lack of a clear distinction between goods and services in the WTO agreements and divergent classifications adopted by states have led to fragmented and inconsistent VAT collection, potentially creating trade barriers in international e-commerce. This article analyses various approaches to classify goods and services including technological neutrality and tradability. It also uses the modernization of Thailand’s VAT system as a case study to demonstrate the complexity of categorizing digital goods and services for VAT enforcement in international e-commerce. It finds that technological neutrality and tradability are key criteria to separate digital goods from e-services for the proper implementation of WTO obligations. The article concludes with remarks on the correlation between categorizing digital goods and services in VAT collection and protectionism in cross-border e-commerce.

VAT in the Digital Age Package: Singling Out the Single VAT Registration

Intro: In this article the authors address the single VAT registration part of the proposals for the VAT in the Digital Age initiative tabled by the European Commission on 8 December 2022. The authors discuss the most important proposed rules that are likely to enter into force in 2024 and 2025. This article takes the opportunity to analyse the proposals before the possible adoption by the Council and the subsequent application and proposes possible improvements. VAT (Value Added Tax), EU VAT system, VAT in the Digital Age, reverse charge rule, transfer of own goods, e-commerce, platform liability, OSS, I-OSS, VAT collection, legislative process

The impact of China’s VAT reform policy on financial performance of listed companies in China’s cultural industry

The cultural industry with innovation, low pollution and low energy consumption may become the next strategic pillar industry in China. The tax reform of ‘Replacing business tax with value-added tax (VAT)’ not only lays a solid foundation for the establishment of green tax system, but also contributes to the enterprise development and performance improvement. This paper aims to study the impact of VAT reform policy on the financial performance of listed companies in the cultural industry. To this end, the PSM-DID method was applied, and natural experiments were made by taking A shares listed companies from 2009 to 2014 as the reform pilot. The research finds that: (1) the VAT reform policy ‘replacing business tax with VAT’ is conducive to improving the financial performance of cultural industry enterprises; (2) the policy has more positive impact on the financial performance of manufacturing cultural enterprises than on non-manufacturing ones; (3) compared with state-owned enterprises, the policy contributes more to the financial performance of private enterprises. This study provides empirical evidence for evaluating the impact of VAT reform policy on the operation of cultural industry enterprises. It has practical significance for improving the VAT system and the financial operation of cultural enterprises.

The impact of greater VAT tax neutrality on total factor productivity: Evidence from China’s VAT credit refund reform in 2018

Prior to 2018, Chinese enterprises registered for Value Added Tax (VAT) were required to carry forward excess input tax credits indefinitely. Following the 2018 VAT Credit Refund Reform, enterprises became entitled to refunds on excess input tax credits, as is standard in a conventional VAT system. The reform significantly enhanced tax neutrality, which might have been expected to have impacted production efficiency. This study employs a difference-in-differences (DID) method of analysis, using the commencement of the 2018 reform as the focal point, to highlight how from 2014 to 2020 certain Chinese enterprises received fiscal benefits from the reform while others did not. The conclusion is striking; enterprises that were able to obtain VAT refunds increased their total factor productivity by 6.96% compared to those that received no fiscal benefit from the reform. The outcome reflects the impact of the VAT credit refund as a source of financing for these firms, leading directly to increased investment, or, in the case of high-tech enterprises, increased R&D. The impact of this change is particularly pronounced in private enterprises and growing businesses. Our study provides evidence of the benefits of VAT reform in the direction of neutrality by providing swift and full refunds for excess input tax credits.

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.

Isaac Sharara’s Law of Proportional Value Added Tax Calculation in a Multi-currency economy. A case for Zimbabwe 2023

This paper has a cardinal goal of suggesting a way or method to calculate Value added tax (VAT) in a multi-currency economy where the VAT must be collected and remitted in the currency of tender. This paper notes that a good VAT system must not affect the choices of the consumer in any way and also that, each taxpayer must be allowed to contribute to state tax collections in any of the officially allowed currencies in that economy. In this paper, proportions are used to calculate the contribution per currency within a single transaction involving a single standard rated product or service.

Value added tax non‐compliance in the car market

AbstractWe examine value added tax (VAT) non‐compliance in the European Union (EU) car market. This issue is of paramount importance because of the loss of VAT revenue, the profound distortion of market mechanisms, and the dangerous variety of fraudulent schemes employed. In addition to the usual VAT fraudulent schemes on intra‐community trade, the special regimes, and the different regulations for the sale of motor vehicles in the EU member states per se, favour non‐compliance in the car market. Non‐compliance also takes advantage of the lack of adequate and prompt information exchange among the tax administrations of different countries and, within each country, between the tax administrations and their departments responsible for motor vehicles. We highlight the fact that the current measures are insufficient to fight VAT non‐compliance and that the new rules proposed in the ‘definitive VAT system’ are inadequate to control the proliferation of scams in the car market. Accordingly, we suggest more substantial measures: well‐targeted and prompt cross‐checks through archives and databases, and the monitoring of their effectiveness; electronic invoices; real‐time exchanges of information between the different tax and transport authorities; and increased harmonisation of the special VAT schemes that aim to eliminate one of the most exploited opportunities for illicit gain, to the detriment of the EU member states.

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.

Performance of Value Added Tax System in Nepal: A Model-based Descriptive Analysis

The implementation of Value Added Tax (VAT) policy in Nepal has completed almost 24 years. The paper intends to assess the VAT performance in terms of revenue collection over the past two decades of its implementation. An econometric modeling and descriptive analysis methods have been applied to analyze secondary time series data extracted from Economic Survey 2021. The revenue growth model is applied to calculate the ratio of change in VAT revenue in the current year over the total VAT revenue of the previous year. The data show that VAT collection has been consistently increasing and the collection gap has been decreasing over the years. The major contributing factors are burgeoning import, soaring private consumption, and newly introduced VAT withholding system.

Strategic factors in implementing blockchain technology in Indonesia's value-added tax system

This study examines the strategic factors to implement blockchain technology in Indonesia's Value-Added Tax (VAT) system. Blockchain technology is a transparent technology in which each party who is a member of the chain know the data or information in the blockchain network. Therefore, blockchain technology can be used only for transparent data. The research topic is limited to the scope of VAT because there is data in Indonesia's VAT which is transparent and safe to know by other parties and public. The approach used in this study is qualitative with the aim of analyzing strategic factors for implementing blockchain in Indonesia's VAT system. Based on the objectives, this study was categorized as descriptive research. The data collection techniques used in this study included field studies, in-depth interviews, and literature review related to the topic. The results of this study indicate that the factors that need to be considered in implementing blockchain in Indonesia's VAT system are organizational factors, which consist of organizational readiness, support from parties with higher authority, technological readiness, innovation, governance, and internal regulation processes; environmental factors which consist of external government support and partner support; and technological factors which consist of benefits, data security, smart contract coding, architecture, permissions, and shared infrastructure.

The Effect of Value-added Tax on the Retail and Wholesale Sector and Consumer Behavior in Kingdom of Saudi Arabia (Exploratory Case Study)

Basically, this study explores the effect of value-added tax on the Retail and Wholesale sector and consumer behavior in the Kingdom of Saudi Arabia. Imposing the value-added tax system on some goods and services is considered one of the most important issues that affected the Saudi society to classify it as a consumer society. It is expected that this added tax on sales in the market will have an impact on investment in the national economy. The researcher relied on the use of the descriptive analytical method and found that the most appropriate tool to achieve the objectives of this study is the “questionnaire”. While explaining the effects of value-added tax on the Kingdom of Saudi Arabia, the study methodology is based on valid data and analysis. All the descriptive, analytical and statistical research studies and the survey tool show that value-added tax has an effect on the economy of the Kingdom of Saudi Arabia. It is expected that value-added tax will be beneficial for Retail and Wholesale sector and change the consumer behavior when the efficiency and performance of the tax department are improved. It is recommended improving the individual income before implementing value-added tax. For implementation of value-added tax, individuals need to be aware about it through social media or public campaigns.

The inclusion of insurance services in the European VAT system—a problem that cannot be solved?

In the European Union insurance premiums are not subject to value added tax (VAT), but—in most member states—to special taxes. As these and VAT on inputs are not recoverable there are high cumulative and hidden tax burdens. However, the inclusion of insurance (and other financial services) in the VAT system poses serious conceptual problems. Solutions suggested and discussed in literature as well as relevant regulations in countries outside Europe do not meet the principles constituting the European VAT system. The paper develops a realizable proposal for the inclusion of insurance services in this system meeting its constituting principles.

Applying VAT to financial services: Is the new “mobile-ratio method” adequate for insurance?

Applying Value Added Tax (VAT) to financial services is difficult. Several more or less complex methods for handling financial services within a VAT system have been developed, none of them being fully satisfactory. In 2018, Julio López-Laborda and Guillermo Peña have published “A New Method for Applying VAT to Financial Services” in the National Tax Journal (vol. 71 (1), pp. 155–181), called “mobile-ratio method”. This paper examines whether the new method is adequate for insurance services. It reveals that the analogy between insurance services and other financial services, while amazing at first glance, does not reach far enough to make the “mobile-ratio method” practically applicable to insurance services.

Taxation in a Decentralized Value Added Tax Regime: Implications for States in Nigeria

The study examined the implication of a decentralized Value Added Tax system for states in Nigeria. It is a theoretical presentation that made is made of journals, articles, and data from the National Bureau of Statistics (NBS) accessed on Google Scholar Websites. A total of eighty (80) articles were accessed. Results from a theoretical review revealed that while few states in Nigeria are in favor of a decentralized VAT administration in the country, quite a number of them (States) are averse to the new VAT regime due to differences among the states in terms of volume of business activities and economic power as many of the states rely on federal allocation. The study, therefore, recommends Partial Decentralization (PD) of VAT administration in Nigeria as a measure of autonomy for states that will guarantee fairness in resource control in the Nigerian Society.