VAT Policy Research Articles

DAMPAK KENAIKAN TARIF PPN TERHADAP TINGKAT KEMISKINAN DI INDONESIA

Poverty remains a serious issue in Indonesia, and since the implementation of the 11% VAT policy in April 2022, public concerns about its impact on livelihoods, particularly among the lower-middle class, have increased. Therefore, this study aims to address these concerns by examining the impact of the VAT rate increase on poverty levels in Indonesia. This research employs a qualitative literature study method using secondary data, including publications from the Statistics Indonesia (BPS), scientific journals, e-books, and online news. Data analysis was conducted using the Miles and Huberman approach, which involves data reduction, data presentation, conclusion drawing, and verification. The findings indicate that the increase in the VAT rate to 11% does not directly lead to a rise in poverty levels. In fact, it provides benefits such as increased tax revenue, which is expected to reduce the national budget deficit and promote development. However, this policy also impacts the public's purchasing power, leading to a decrease in consumption. The government is expected to continue monitoring and strengthening mitigation policies to address the impact of the VAT rate increase, preventing misuse and inefficiency in the budget.

Revisiting Value-Added Tax Structures: Strategies For Mitigating Regressivity In Basic Commodities Consumption

This study explores the advantages and disadvantages of implementing a value-added tax on tax-exempt essential goods in Indonesia. The research employs historical, comparative, empirical, and normative legal methods to analyze the tax policy's legal and socio-economic context and assess its impacts and challenges. The analysis shows that applying VAT to necessities with exemptions can increase transparency, reduce tax avoidance, and ensure a fair distribution of the tax burden among businesses and consumers. However, this policy may impose additional administrative burdens and financial pressures on companies, particularly small and medium enterprises. It is crucial to balance promoting tax compliance and alleviating excessive administrative requirements. This research provides extensive insights into the dynamics of VAT policy on essential goods in Indonesia. It presents new perspectives on the distribution of economic burden and provides recommendations based on thorough legal analysis.

Analysis of the Effectiveness of Value Added Tax Policy for Health Services at PT Kimia Farma Diagnostika in 2021

This study aims to analyze the effectiveness of the VAT policy using James L. Gibson's theory of effectiveness in the form of efficiency, development, and the advantages of the applied Value Added Tax policy. Researchers will also see if there are any obstacles experienced and the efforts that will be applied. This research will be conducted at PT Kimia Farma Diagnostika using a qualitative descriptive method. This research data will be obtained using primary and secondary data from interviews and direct observations at PT Kimia Farma Diagnostika.

Implementation of the Electronic System for Collection of Value-Added Tax on Trade: Appointing Foreign and Local Companies as Collectors

The large number of offers of services and goods in utilizing digitalization is the background for the PMSE VAT policy in increasing state income broadly and evenly. PSME's VAT policy is also faced with the challenge of creating equality in terms of paying state contributions between traditional businessmen and economic activities that use the internet or among domestic businesses. Selection Appointment of entrepreneurs to collect electronic trade with PKP who have not been appointed as collectors creates inequality in terms of paying taxes and reporting SPT where every company appointed as PMSE collector is required to report reporting in accordance with rules and policies. This study aims to determine the PMSE VAT collection policy through the appointment of local digital companies that have and have not been appointed as PMSE VAT collectors in paying attention to the principles of a good taxation system and knowing the level playing field of local companies that have and have not been appoint PMSE VAT collector based on the theory of fairness. The type of assessment in this thesis uses qualitative methods with literature studies and interviews. Informants in this study were staff of the fiscal policy agency, staff of the directorate general of taxation, lecturers and tax consultants. The conclusions obtained explain that the policy in collecting electronic sales tax to pay attention to the principles of a good taxation system has not been properly fulfilled.

Analysis of VAT Policy Toward Overseas Digital Service Providers Through Consumer Regulatory Impact Assessment in Indonesia

This study aims to examine the extent to which PMK No. 60/PMK.03/2022 is said to meet international standards through Regulatory Impact Assessment in the guidelines of the Organization for Economic Co-operation and Development. This research applies qualitative research with a case study approach. The data in this study are qualitative data sourced from interviews (primary data), observation, and documentation (secondary data). Data analysis was conducted in several stages, namely data collection, data refinement, data processing, data analysis, and conclusion drawing, as well as ten RIA question steps as a measuring tool. The results showed that both PMK 48/2020 and PMK 60/2022 have answered the ten Steps of RIA questions well, but the distribution of benefits to the community still needs to be elaborated in order to increase transparency. Furthermore, easy access to the draft policy of PMK 60/2022 so that the government's intentions and objectives for enacting the policy are clear and understood by the public.

An Analysis of the Value Added Tax (Vat) Gap in Zambia

The aim of this study was to empirically examine the effect of the Zambian VAT administrationon tax revenue by analyzing the VAT gap in Zambia. The study attempted to assess from empirical evidence if there is room for the revenue authorities to enhance VAT revenue collection without increasing the rate. The data used in this study was time series data sourced from the Zambia Revenue Authority database of 2020. The research used a data collection guide that sought to collect data on VAT and any other relevant information regarding VAT gaps and VAT administration. This study used a population of the totality of the Zambian economy which included all the existent revenue streams of the Zambian government. The study employed the multiple regression model and used descriptive statistics and correlation analysis. Data collected was reviewed for a period of over 10 years (2009 to 2019).The study concludes that deferring VAT and Penalties on VAT for non-compliance had no effect on the VAT collected under the period of review. Indicating that low willingness by taxpayers to pay correct taxes on time. Additionally, the study concludes that the VAT policy gap has no effect on VAT revenue in the period under review. Indicating that ZRA should improve measures of VAT enforcement. Thus, the study recommends that ZRA should make deliberate efforts to improve its enforcement by having a dedicated Enforcement Unit for Domestic taxes just like the one assigned to customs. Further, since the payer of VAT is the final consumer, ZRA should encourage voluntary tax compliance among final consumers by intensifying the demand a receipt campaign as well as increasing the education on the benefits of tax compliance to the nation’s development. Further, ZRA should expedite the process of fiscalization i.e. the mandatory issuance of fiscal receipts by all VAT registered suppliers.

Modeling the Economic Impact of Value Added Tax Reforms in Nigeria

The purpose of this study is to verify the response of economic services to changes in value-added tax legislation. This research looked at all economic activities, including agriculture, transportation, communication, entertainment, construction, manufacturing, and financial services, among others. Nonetheless, the VAT policy amendment is intended to improve economic activity and provide funds for the government to carry out social obligations. However, it is critical to provide the government with empirical data to help guide these amendments as needed. The study employs ARDL and ECM to investigate both the long- and short-term effects of VAT reform on economic productivity enhancement. The data used in this study ranges from 1994, when VAT was fully implemented in Nigeria, to 2022. The use of these data allows for a thorough examination of the economic impact of VAT reform. The findings indicate that in the long run, VAT has a positive and significant impact on economic services, but in the short run, the findings show that VAT has an intangible impact on economic activities. The implication is that the economic service response to VAT reformation can only be tangible and positive in the long run when businesses are able to adjust to policy changes. The study also reveals that inflation is harmful to the economy in both the long and short run. As a result, the study suggests that policymakers keep an eye on inflation before raising or lowering the VAT rate in order to avoid a massive economic collapse.

The impact of tax reform on firms' digitalization in China

Digital transformation is continuous and costly, thereby posing a challenge to the stability of firms' cash flow. Tax cuts are conducive to improving cash flow condition. This study examines the impact of the business tax to value-added tax (BT to VAT) policy on digital transformation by using data of listed firms in China from 2007 to 2019. We measure the degree of firms' digitization by textual analysis and find that the BT to VAT policy significantly promotes the digital transformation of firms. Our results remain robust after several robustness checks. Heterogeneity analysis shows that the driving effects of the BT to VAT policy on digital transformation are considerably pronounced for high-tax-burden, low-profit, and non-state-owned firms; firms with high financing constraints; and firms located in the eastern region. Lastly, this study examines the potential mechanisms. Findings suggest that the tax cut effects of the BT to VAT policy enable firms to undertake digital transformation. We also find that digital transformation strengthens firms' competitive performance, thereby possibly further enhancing the willingness of enterprises to pursue digital transformation.

Influence of VAT Incentives on Financial Performance of Manufacturing Companies in Kenya

The purpose of the study was to determine the influence of VAT incentives on financial performance of manufacturing firms in Kenya. The study focused on all manufacturing companies registered under Kenya Association of Manufacturers. The null hypothesis of the study was that there is no statistically significance association between VAT incentives and financial performance of manufacturing companies in Kenya. Descriptive survey research design was adopted where a sample of 211 respondents was selected from a target population of 447 manufacturing firms using stratified random sampling technique. The study collected data for a period covering 10 years, which was from 2009 to 2018. The targeted respondents were the accountants and officers in senior management. The response rate on the questionnaires issued was 73.5%. Both descriptive and inferential data analysis was carried out. The data failed in the test of normality and so the study applied ordinal regression analysis for the determination of the model. The findings of the study revealed that VAT incentives had statistically significant influence on financial performance of manufacturing companies in Kenya; hence, null hypothesis was rejected at 0.05 level of significance. The study concluded that influence of VAT incentives leads to improvement in financial performance of manufacturing firms in Kenya. Hence, VAT incentives are key to financial performance of manufacturing companies. The study therefore recommended that the management of manufacturing companies should utilize VAT incentives that are offered by the government, and the government should review the VAT policy so as to widen the gap on VAT incentives.

The Role of Public Accountants in Fraud Prevention and Detection in the Taxation Sector during Covid-19

Until now, there have been many cases of tax evasion that have occurred in Indonesia. Fraud is an act of deviation or omission that is intentionally carried out to deceive, or other parties suffering losses or fraud perpetrators obtaining financial benefits, either directly or indirectly. The design of this research based on literature review. Tax policy in the majority of countries was oriented towards mitigating health impacts and preventing economic pressure. Recently we have also seen other motives that various countries in the world want to achieve as Secretary-General Tax Report to G-20 Finance Ministers and Central Bank Governors. Quick responses through various tax relaxations came through twenty-two legal products. One of the things that is being studied is changes to VAT policy scheme. Currently, the Indonesian Institute of Certified Public Accountants is submitting an exposure draft related to the SJI. Tax incentives provided during the COVID-19 pandemic has the potential to be misused. The role of Public Accountants in preventing and detecting fraud in the taxation sector can be maximized if the public accountant carries out adequate procedures in accordance with applicable auditing standards. Public accountants need to increase the independence of each individual e.g., Continuing Education Program (PPL).

A Temporary VAT Cut as Unconventional Fiscal Policy

We exploit the unexpected announcement of an immediate, temporary VAT cut in Germany in the second half of 2020 as a natural experiment to study the spending response to unconventional fiscal policy. We use survey and scanner data on households’ consumption expenditures and their perceived pass-through of the tax change into prices to quantify its effects. The temporary VAT cut led to a substantial relative increase in durable spending of 36% for individuals with a high perceived pass-through. Semi- and non-durable spending also increased. According to our preferred estimates, the VAT policy increased aggregate consumption spending by 34 billion Euros. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

A Temporary VAT Cut as Unconventional Fiscal Policy

We exploit the unexpected announcement of an immediate, temporary VAT cut in Germany in the second half of 2020 as a natural experiment to study the spending response to unconventional fiscal policy. We use survey and scanner data on households’ consumption expenditures and their perceived pass-through of the tax change into prices to quantify its effects. The temporary VAT cut led to a substantial relative increase in durable spending of 36% for individuals with a high perceived pass-through. Semi- and non-durable spending also increased. According to our preferred estimates, the VAT policy increased aggregate consumption spending by 34 billion Euros.

VAT exemption and capital market transactions

In this paper, we modelled the impact of VAT exemption policy on capital market transactions using the Garch model. We implored the use of Garch 1.1 and Assymetric T-Garch model to examine the effect of the introduction of the VAT policy on the Nigerian stock exchange activities. The result of the study suggests that the implementation of VAT exemption has caused volatility in the volume of shared traded by informed and uninformed investors, also the policy has moderately impacted on the volume of transactions. The study recommends that government should evaluate the period of the VAT exemption policy from 2014 to the year of re-introduction of value added tax charges on transactions for proper alignment and possible re-introduction of the VAT exemption.

Estimating VAT Policy and Compliance Gap across the Iran’s Provinces

Estimating VAT Policy and Compliance Gap across the Iran’s Provinces

EFFECT OF VAT INCENTIVES ON THE PERFORMANCE OF EPZ FIRMS IN KENYA

Purpose: The purpose of this study was to determine the effect of VAT Incentive on the performance of EPZ firms in Kenya.Methodology: This research used correlation research design. Sample size of all the 86 registered EPZs firms was used in this study. Primary data was obtained using questionnaires. Secondary data from the registered firms was collected on; ROA, number and value of jobs and the length of stay of the firms. The study used both descriptive and inferential statistics to conduct data analysis.Results: The results of study revealed that at 5% significance level, VAT incentives had a positive and significant relationship with performance of EPZ firms measured using ROA. The results further revealed that at 5% significance level, VAT incentives were found to have positive and significant relationship with performance of EPZ firms measured using the number of total jobs created in Kenya. The results also revealed that at 5% significance level, VAT incentives were found to have positive and significant relationship with performance of EPZ firms measured using the number of years in operationUnique contribution to theory, practice and policy Based on the study findings, it was recommended that the government should reconsider its VAT policy by encouraging more VAT rebates to firms in order to boost their productivity and increase the volume of exports. The study also recommends that the government should introduce a strong monitoring unit to oversee the administration of tax incentives. Government should equally pay attention to the issue of security and infrastructure which are basic in order to maximize the benefits of tax incentives.

In pursuit of tax equity: lessons from VAT rate structure adjustment in Poland

In 2011, in the aftermath of the economic crisis, Poland increased its value added tax rates. Despite an already large VAT policy gap, further rate differentiation was used to address distributional concerns and to protect the most vulnerable households. We find that the changes to the VAT rate structure hardly improved the overall progressivity of the VAT and the tax system as a whole. While providing only minimal relief to the poor, taxation of food products at a super reduced rate greatly subsidized the richer households. With a small change to the income tax structure, the government could have secured more progressivity at a lower cost in terms of revenue foregone.

Efficiency of a single-rate and broad-based VAT system: the case of Bosnia and Herzegovina

The aim of this paper is to analyze the performance and efficiency of the VAT system in B&H and explore the effects of internal and external factors influencing VAT collection. The VAT system in B&H is a consumption-type, single-rate and broad-based system. Ever since its implementation, VAT collection in B&H has been subject to strong oscillations, from an extremely high performance in the first two years after the introduction, to a sharp drop at the beginning of the crisis. After a temporary recovery, VAT collection declined in the last quarter of 2012 and has been negative ever since, although a weak recovery of the B&H economy was observed in 2013. The key hypothesis is that the high efficiency of the broadbased and single-rate structured VAT system may be neutralized by the country’s specific circumstances and VAT policy design. Applying a set of indicators for VAT efficiency analysis, developed by IMF, OECD and EU, we find a deterioration of the components of the policy gap caused by derogations of the VAT Law, and an increasing compliance gap, due to an increase of the VAT debt and tax evasion, in consequence of poor policy design in the field of excises. As a result of the influence of the country’s specific circumstances and its VAT policy design the identifiable current net losses on VAT in 2013 amount to 4% of net VAT collection or 0.4% of GDP. The analysis presented in the paper proves the main hypothesis that a VAT design, even when it is close to theoretically ideal concept, cannot on its own produce a high level of VAT efficiency and performance.

VAT Fraud as a Policy Stimulus - Is the US Watching? VAT Withholding, RTvat, and the Mittler Model

The EU VAT, like most mature tax regimes, is resistant to change. Fraudsters are testing this resilience today, and this may not be such a bad thing for policy-makers. Significant challenges produce significant reforms proposals. If the US is seriously considering a VAT it would do well to observe this dynamic, avoid the known pitfalls, and work to advance the policy debate before it inherits a problem. The most serious EU VAT frauds include missing trader intra-community fraud (MTIC), its extra-community companion in tradable services (MTEC), and sales suppression (the fraud of manipulating cash register records with Zappers and phantomware). Fraud does seem to bring out the best efforts in reform proposals. This paper highlights three examples of this fraud/reform dynamic. The examples are drawn from the payment side, and can be seen in a continuum. The first example presents the Ecuadorian VAT withholding regime. In EU terms VAT withholding is the reverse charge mechanism, with an added requirement that the withheld VAT must be directly remitted to the treasury. Financial intermediaries are required to split VAT from payments and directly deposit these funds with the Treasury. Secondly, the RTvat is considered RTvat presents a similar VAT withholding proposal for the EU. However, under the RTvat the third-party withholding application is dramatically expanded to all business-to-business (B2B) payments. But the RTvat goes even further. It applies the same third-party withholding mechanism to: (a) all business-to-consumer (B2C) transactions, and then applies the third-party, intermediary payment principle to (b) VAT refunds. The third example is the Mittler Model. This EU proposal takes the next logical step and eliminates all B2B VAT payments (but retains the B2B paperwork). Simply stated, the Mittler Model replaces the money (the payment of the VAT) with encrypted exemption certificates. Perhaps the US needs to take a good look at the RTvat, or the Mittler Model when it considers a VAT. Just because these proposals for change are meeting resistance in a mature system, like the EU VAT, does not at all mean that they would be inappropriate for the US if it decides to look seriously at a VAT. VAT fraud is a very effective VAT policy stimulus.

Bidding for international sport events: how government supports and undermines national governing bodies of sport

Over the last 20 years bidding for the rights to host sport events has become increasingly competitive. While a range of factors underpin successful bids, political support, particularly in the context of bidding for mega sport events such as the Olympics or the FIFA World Cup, is essential. This has resulted in an increasingly politicized bidding process. The role of government policy and the impact on sport-event bidding therefore plays a key role in determining whether a national governing body of sport (NGB) is competitive during the bid process. Two central issues are considered within this article. First, it considers the ways in which the UK government is supportive of NGBs during the bidding process. Second, it focuses specifically on government taxation policy and discusses how the tax environment in the UK has the potential to undermine the competitiveness of UK NGBs when bidding to host sport events. Drawing on semi-structured interview data from 10 individuals representing nine national governing bodies of sport and six other stakeholders involved in the bidding process, the article illustrates that NGBs receive bid support from central government through the Department for Culture, Media and Sport, from local government, in addition to non-departmental public bodies including regional development agencies and UK Sport. The interview analysis also illustrates that this support is offset by the adverse impact of income tax and VAT policy of HM Treasury. The article concludes with the identification of four key issues which require further research. First, should HM Treasury introduce legislation to relinquish the right to tax a percentage of worldwide endorsement income from overseas sports people? Second, when bidding for one-off sport events, should HM Treasury provide exemptions from player tax and HMRC guarantee that they will not pursue the tax liability? Third, is there a need for HM Treasury to create a specialist sports events unit, and fourth, should a reduced VAT rate of 5% on spectator entry fees be introduced.

VALUE‐ADDED TAX IN A BORDERLESS SA‐BLNS REGION

AbstractMarket integration and the abolition of border controls increase the mobility of consumers and cross‐border shopping. This makes it difficult to maintain a destination‐based VAT. Because of differences in the size of countries, governments of different sizes may engage in inefficient tax competition. Such externalities result in a call for tax coordination and a review of VAT regimes most suitable to a globalised world. One of the ultimate objectives of an African Union is a single market. This paper introduces the potential VAT policy implications of further economic integration within Southern Africa as a prelude to an African Economic Community, drawing on the experience of the EU in particular. When the critical factors that may impact on VAT policy are viewed together with SACU's long history of customs cooperation, a form of clearing‐house regime seems appropriate. However, this may not be politically appropriate, thus clearing the way for a more conventional approach, such as the transitional EU‐VAT regime.