The Value-Added Tax: Its Causes and Consequences

Ben Lockwood and Michael Keen

No 2007/183, IMF Working Papers from International Monetary Fund

Abstract: Has the VAT proved, as its proponents claim, an especially effective form of taxation? To address this, this paper first shows that a tax innovation-such as the introduction of a VAT- reduces the marginal cost of public funds if and only if it also leads an optimizing government to increase the tax ratio. This leads to the estimation, on a large panel, of a system of equations describing the probability of VAT adoption and the revenue impact of the VAT. The sign of the revenue impact is generally ambiguous, but most countries that have adopted a VAT seem to have gained a more effective tax instrument in doing so.

Keywords: WP; VAT dummy; revenue equation; dependent variable; open economy; VAT adoption (search for similar items in EconPapers)
Pages: 36
Date: 2007-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=21121 (application/pdf)

Related works:
Journal Article: The value added tax: Its causes and consequences (2010)
Working Paper: The Value Added Tax: Its Causes and Consequences (2007)
Working Paper: The Value Added Tax: Its Causes and Consequences (2007)
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:imf:imfwpa:2007/183

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().