The VAT Paradox in Resource Dependent Economies

Rabah Arezki, Frederick van der Ploeg, Gregoire Rota-Graziosi, Văn Đạo Lê and Rick van der Ploeg

No 11967, CESifo Working Paper Series from CESifo

Abstract: The introduction of the Value Added Tax (VAT) has been widely perceived as a successful instrument, boosting government revenue and stimulating industrialization. However, in countries that are heavily dependent on exports of natural resources the introduction of the VAT has led on average to lower tax revenues and did not stimulate industrialization. The VAT thus did not help these countries to diversify away from the natural resource sector contrary to its promise. The results indicate a novel channel for the resource curse hinging on the interaction between economic structure and the design of tax systems.

Keywords: natural resource; tax; industrialization; value added tax (search for similar items in EconPapers)
JEL-codes: H25 O13 O14 (search for similar items in EconPapers)
Date: 2025
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