Tariffs Versus VAT in the Presence of Heterogeneous Firms and an Informal Sector
Ronald Davies () and
No 1006, Working Papers from Oxford University Centre for Business Taxation
The debate over the use of tariffs or value added taxes in developing countries has focused on the difficulty of collecting VAT from the informal sector of the economy. This paper contributes by considering this issue with heterogeneous firms and endogenous entry. This yields two new results. First, a cut in the tariff in and of itself can reduce the size of the informal sector. Second, the imposition of a VAT need not increase the number of informal firms. In fact, for many parameterizations of the model, higher VAT reduces informality. Despite this, whether a revenue neutral shift from tariffs to VAT increases or decreases welfare depends on the parametrization. Therefore while this move may be welfare improving in some cases, it is not a one-size fits all policy.
Keywords: Value Added Tax; Heterogeneous Firms (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://www.sbs.ox.ac.uk/sites/default/files/Busine ... Series_10/WP1006.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/Publications/Working_Papers/Series_10/WP1006.pdf [301 Moved Permanently]--> https://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/Publications/Working_Papers/Series_10/WP1006.pdf)
Journal Article: Tariffs versus VAT in the presence of heterogeneous firms and an informal sector (2011)
Working Paper: Tariffs Versus VAT in the Presence of Heterogeneous Firms and an Informal Sector (2010)
Working Paper: Tariffs Versus VAT in the presence of heterogeneous firms and an informal sector (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:btx:wpaper:1006
Access Statistics for this paper
More papers in Working Papers from Oxford University Centre for Business Taxation Contact information at EDIRC.
Bibliographic data for series maintained by Dongxian Guo ( this e-mail address is bad, please contact ).