International Vat Harmonization: Economic Effects

Jacob Frenkel, Steven Symansky and Assaf Razin

No 1991/022, IMF Working Papers from International Monetary Fund

Abstract: This paper highlights key macroeconomic issues related to VAT harmonization. A model is developed which emphasizes the effects of changes in the time profile of various taxes on international behavior. Dynamic simulations reveal that the macroeconomic and welfare implications of VAT harmonization, including conflicts of interest, depend critically on the tax system and the degree of substitution governing temporal and intertemporal allocations. We also demonstrate that the effects of revenue-neutral tax conversions between income and consumption tax systems undertaken by a single country depend critically on international differences in behavior.

Keywords: WP; tax revenue; cash flow; terms of trade; discount factor; supply schedule; tax system; VAT harmonization; VAT HARMONIZATION; VAT system; harmonization arise; home country VAT; current account position; Value-added tax; Income tax systems; Consumption; Cash-flow tax; Europe; Global (search for similar items in EconPapers)
Pages: 48
Date: 1991-02-01
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1991/022

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