Is VAT the Best Way to Impose a General Consumption Tax in Developing Countries?

Richard M. Bird ()

No 602, International Tax Program Papers from International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto

Abstract: In this paper we discuss some recent critical literature on VAT in developing countries relating to its revenue productivity, its equity, and its impact on the development of the formal economy. Illustrating our argument with reference to two recent country studies (of Ukraine and Jamaica) we conclude that while there is merit in many of the criticisms that have been made, on the whole if a country needs a general consumption tax, as most developing countries do, then VAT is the one to have in almost all cases – although this conclusion certainly does not imply that the VAT already in force in most such countries is necessarily the ‘best’ VAT for their circumstances.

Keywords: value-added tax; progressivity; informal economy; Ukraine; Jamaica. (search for similar items in EconPapers)
JEL-codes: H24 H22 O17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2006-03
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Working Paper: Is VAT the Best Way to Impose a General Consumption Tax in Developing Countries (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:ttp:itpwps:0602

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