Modelling Value-Added Tax in The Presence of Multiproduction and Differentiated Exemptions

James A. Giesecke and Hoang Nhi Tran

No 331894, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: We develop a framework for economy-wide modelling of value-added tax systems. Our framework models a number of complexities of VAT systems as they are implemented by tax agencies. In particular, we model multiple rates, multiple exemptions, multiple degrees of refundability across commodity users, and multi-product enterprises. A detailed VAT framework is important for correct modelling of VAT within a general equilibrium model. Such a framework is also of value in correctly representing the distribution of indirect tax payments within the database of a general equilibrium model, a prerequisite of accurate welfare analysis. We use the model to analyse the effects of simplifying Vietnam’s complex VAT system. We simplify the system by moving from three tax rates to one budget-neutral rate, while also removing many discretionary exemptions.

Keywords: Public Economics; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 45
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331894

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