Webinar Series on the VAT by IMF/RMTF (2020)
“The IMF and the RMTF will host a series of virtual events on the VAT in the coming months. The series, comprising four webinars covering different aspects of the VAT, will be short, each running for up to two hours, and targeted at strategic-level VAT issues. The webinars will mainly entail an organized discussion among small panels, leading to an exchange of views and Q&A.
Opening remarks (Mr. Vitor Gaspar): The remarks emphasized the importance of the VAT within the financing for development agenda.
The keynote presentation (Mr. Michael Keen): The presentation provided an overview of key developments and issues about the VAT:
Popularity of the VAT has been steadily increasing, new countries are still introducing every year. Accordingly, the share of revenues delivered by the VAT has been increasing across country groups and countries with a VAT tend to raise more revenues.
There are good reasons for the popularity of the VAT: it is a growth friendly tax and has built-in safeguards to protect revenue even if the VAT chain breaks. But this assumes that the design remains as intended: broad base, with few or no exemptions or other special treatments. Still, there is a lot of variation across countries, such as in the number of VAT rates and the level of the registration threshold.
One of the most persistent questions around the VAT is whether it is regressive, and if there is a way to make it more progressive by adjusting VAT design parameters. Analysis shows that preferential rates actually benefit the better off, and that there are generally more efficient fiscal instruments outside the VAT to benefit poor households and improve redistribution.
Some common concerns around the VAT are related to its administration. However, the administration of the VAT is not more complex than that of other taxes and indeed less so than the income tax, the other principal source of revenue for most countries.
Other important design issues include digitalization of the economy, financial sector, VAT in the context of subnational governments, and cross border services, some of which were then discussed by our panel…”
