The VAT at 100 A retrospective survey and agenda for future research Joel Slemrod and Tejaswi Velayudhan
By: Slemrod, Joel B
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Contributor(s): Velayudhan, Tejaswi.
Material type: 
ArticleSubject(s): IMPUESTO SOBRE EL VALOR AÑADIDO | HISTORIA
In:
Public Finance Review v. 50, n. 1 January 2022, 4-32Summary: We take stock of what is known about the consequences of actual value added tax (VAT) systems, nearly 100 years since its conception. We benchmark it to the tax it most often replaced—the retail sales tax (RST). We do this not because we advocate a return to the RST, but because it allows us to evaluate the performance of two tax instruments in actual practice instead of comparing them to their idealized versions, which are never achieved. Doing so highlights different areas of focus than traditional comparisons to the “good” VAT. Like the RST, the VAT is weak at the final stage and technological advances that ameliorate VAT issues could also be applied to the RST. VAT introduces new evasion opportunities not possible in an RST such as invoice mills and carousel fraud. We propose new metrics and a research agenda to evaluate the “health” of the real VAT.
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| OP 581/2021/5-1 Balanced budget requirements revisited | OP 581/2021/5-2 Public input provision, tax base mobility, and external ownership | OP 581/2022/1 Public Finance Review | OP 581/2022/1-1 The VAT at 100 | OP 581/2022/1-2 Fiscal decentralization and the composition of local government expenditure | OP 581/2022/2-3 Online open budget | OP 581/2022/3 Public Finance Review |
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We take stock of what is known about the consequences of actual value added tax (VAT) systems, nearly 100 years since its conception. We benchmark it to the tax it most often replaced—the retail sales tax (RST). We do this not because we advocate a return to the RST, but because it allows us to evaluate the performance of two tax instruments in actual practice instead of comparing them to their idealized versions, which are never achieved. Doing so highlights different areas of focus than traditional comparisons to the “good” VAT. Like the RST, the VAT is weak at the final stage and technological advances that ameliorate VAT issues could also be applied to the RST. VAT introduces new evasion opportunities not possible in an RST such as invoice mills and carousel fraud. We propose new metrics and a research agenda to evaluate the “health” of the real VAT.
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