Modern VAT by Liam Ebrill, Michael Keen, Jean-Paul Bodin, and Victoria Summers published by IMF (2001).
“The rapid and seemingly irresistible rise of the value-added tax (VAT) is probably the most important tax development of the latter twentieth century, and certainly the most breathtaking. Forty years ago, the tax was little known outside dull treatises. Today it is a key source of government revenue in over 120 countries. About 4 billion people, 70 percent of the world’s population, now live in countries with a VAT, and it raises about $18 trillion in tax revenue— roughly one-quarter of all government revenue. Much of the spread of the VAT, moreover, has taken place over the last ten years. From having been largely the preserve of more developed economies in Europe and Latin America, it has become a pivotal component of the tax systems of both developing and transition economies.
This book seeks to draw out the lessons from this experience, especially that in recent years. The VAT has been seen as a key instrument for securing macroeconomic stability and growth by placing domestic revenue mobilization on a sounder basis, so that the International Monetary Fund (IMF) has attached considerable importance to its proper design and implementation. Within the context of these wider concerns, the Fiscal Affairs Department (FAD) of the IMF has provided a considerable amount of technical assistance in relation to the VAT (sometimes in conjunction with the IMF’s Legal Department).1 Indeed well over half of all countries that have introduced a VAT during the last twenty years made use of FAD advice in doing so, and the proportion has been rising. This book has its origins in a self-assessment of the advice that FAD has provided in the area. While some traces of that exercise doubtless remain, and the book draws heavily on FAD’s experience, the focus of this book is outward-looking. Its purpose is to explore, and draw the lessons of experience for, some of the central questions that those concerned with the VAT—whether as policymakers, practitioners, or academics—must wonder about. Has the VAT lived up to its promise as an efficient and fair source of revenue? What does a VAT do well, and what, conversely, does it do badly? What are the key issues that arise in designing a VAT? What should be exempt, and what should be taxed? How should small traders be treated? What about the agricultural and financial sectors? Does a VAT require restructuring the organization of the tax administration? What are the main administrative problems that a VAT is likely to encounter, and how can they be resolved? Is it an inherently costly and regressive tax, or, to the contrary, can it be designed to be simpler and fairer than the taxes it often replaces? Are there countries for which a VAT is simply a bad idea?…”
