Preserve Neutrality
International VAT/GST Guidelines
Abstract: The International VAT/GST Guidelines now present a set of internationally agreed standards and recommended approaches to address the issues that arise from the uncoordinated application of national VAT systems in the context of international trade. They focus in particular on trade in services and intangibles, which poses increasingly important challenges for the design and operation of VAT systems worldwide. They notably include the recommended principles and mechanisms to address the challenges for the collection of VAT on cross-border sales of digital products that had been identified in the context of the OECD/G20 Project on Base and Erosion and Profit Shifting (the BEPS Project).
These Guidelines were adopted as a Recommendation by the Council of the OECD in September 2016.
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Citation: International VAT/GST Guidelines. OECD Publishing, 2017. https://doi.org/10.1787/9789264271401-en.
Estimating VAT Pass Through
Abstract: This paper estimates the pass through of VAT changes to consumer prices, using a unique dataset providing disaggregated, monthly data on prices and VAT rates for 17 Eurozone countries over 1999-2013. Pass through is much less than full on average, and differs markedly across types of VAT change. For changes in the standard rate, for instance, final pass through is about 100 percent; for reduced rates it is significantly less, at around 30 percent; and for reclassifications it is essentially zero. We also find: differing dynamics of pass through for durables and non-durables; no significant difference in pass through between rate increases and decreases; signs of non-monotonicity in the relationship between pass through and the breadth of the consumption base affected; and indications of significant anticipation effects together with some evidence of lagged effects in the two years around reform. The results are robust against endogeneity and attenuation bias.
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Citation: Mooij, Ruud A., Dora Benedek, and Philippe Wingender. “Estimating VAT Pass Through.” IMF Working Papers 2015, no. 214 (2015): 1. https://doi.org/10.5089/9781513586359.001.
The Value Added Tax: Its Causes and Consequences
Abstract: This paper explores the causes and consequences of the remarkable rise of the value added tax (VAT), asking what has shaped its adoption and, in particular, whether it has proved an especially effective form of taxation. It is first shown that a tax innovation, such as the introduction of a VAT, reduces the marginal cost of public funds if and only if it also leads an optimizing government to increase the tax ratio. This leads to the estimation, on a panel of 143 countries for 25 years, of a system describing both the probability of VAT adoption and the revenue impact of the VAT. The results point to a rich set of determinants of VAT adoption, and to a significant but complex impact on the revenue ratio. The estimates suggest, very tentatively, that most countries which have adopted a VAT have thereby gained a more effective tax instrument, though this is less apparent in sub-Saharan Africa.
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Citation: Keen, Michael, and Ben Lockwood. “The Value Added Tax: Its Causes and Consequences.” Journal of Development Economics 92, no. 2 (2010): 138–51. https://doi.org/10.1016/j.jdeveco.2009.01.012.