EconPapers    
Economics at your fingertips  
 

The Revenue Efficiency of India’s Sub-National VAT

Astha Sen () and Sally Wallace
Additional contact information
Astha Sen: Microeconomics, Sonoma State University, http://www.sonoma.edu/

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: The rise of the value-added tax (VAT) has undoubtedly been one of the most significant tax developments since its inception in 1954 in France. The main reason for the popularity of the VAT is its efficiency over other types of indirect taxes. Not only does it eliminate production inefficiencies associated with the turnover tax, it also is generally thought to be superior to retail sales taxes as they are more vulnerable to evasion and avoidance and they may lack a “self-policing” aspect of administration. The self-policing of the VAT has a higher probability of exposing forged accounts and an informal economy than the retail sales tax (Bird 2005 and Agha et al 1996). Primarily for the same reason, a VAT is generally regarded as a more promising consumption tax for developing countries where the size of the informal sector is large. However, opponents of the VAT do not quite agree. Some studies argue that the opposite is true. For example, Emran and Stiglitz (2005) show that in the presence of a substantial ‘informal’ sector, the VAT that falls on the formal sector acts to deter the growth and development of the economy as a whole. Also, the retail sales tax may be cheaper to administer since there are fewer taxpayers and thus it is less complicated. Despite these contradictory views, the VAT has replaced some version of a retail sales tax regime in many developing countries and it continues to do so.

Pages: 36 pages
Date: 2017-04
New Economics Papers: this item is included in nep-iue
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://icepp.gsu.edu/files/2017/04/paper1705.pdf (application/pdf)

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: https://EconPapers.repec.org/RePEc:ays:ispwps:paper1705

Access Statistics for this paper

More papers in International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University Contact information at EDIRC.
Bibliographic data for series maintained by Paul Benson ().

 
Page updated 2025-03-30
Handle: RePEc:ays:ispwps:paper1705