Economics at your fingertips  

The VAT in practice: equity, enforcement, and complexity

Giulia Mascagni (), Roel Dom, Fabrizio Santoro () and Denis Mukama
Additional contact information
Giulia Mascagni: Institute of Development Studies and International Centre for Tax and Development
Roel Dom: Belgium. Previously at the Institute of Development Studies and International Centre for Tax and Development
Fabrizio Santoro: Institute of Development Studies and International Centre for Tax and Development
Denis Mukama: Rwanda Revenue Authority

International Tax and Public Finance, 2023, vol. 30, issue 2, No 9, 525-563

Abstract: Abstract The value-added tax (VAT) is meant to be an efficient and self-enforcing tax on consumption. Yet, being a rather sophisticated tax, the VAT can also be complex and costly to administer. By examining the case of Rwanda, this paper assesses the extent to which the VAT’s potential materialises in the context of a lower-income countries. Using a mixed-methods approach, which combines qualitative information from focus group discussions with the analysis of administrative and survey data, this paper makes two contributions. First, it documents reporting inconsistencies in VAT data, providing new evidence on how weak capacity prevents tax administrations in lower-income countries from reaping the full benefits of the VAT. Second, it shows that the VAT, as applied in practice, differs substantially from its theoretical functioning. This generates differences in tax burdens across firms, despite a proportional tax rate, with important distributional implications. We also document that the VAT chain often breaks down, with implications on the VAT’s efficiency.

Keywords: Value-added tax; Equity; Enforcement; Complexity; Tax administration (search for similar items in EconPapers)
JEL-codes: H22 H25 H26 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2

DOI: 10.1007/s10797-022-09743-z

Access Statistics for this article

International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf

More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2023-03-19
Handle: RePEc:kap:itaxpf:v:30:y:2023:i:2:d:10.1007_s10797-022-09743-z