Jinjarak, Yothin (2008) 'The collection efficiency of the Value Added Tax: Theory and international evidence.' Journal of International Trade and Economic Development, 17 (3). pp. 391-410.
Download (486Kb) | Preview
This paper evaluates the political economy and structural factors explaining the collection efficiency of the Value Added Tax (VAT), where the collection efficiency is determined by the probability of audit and by the penalty on underpaying, and implementation lags imply that the present policy maker determines the efficiency of the tax system next period. Theory suggests that the collection efficiency is affected by political economy considerations - greater polarization and political instability would reduce the efficiency of the tax collection, and collection is impacted by structural factors affecting the ease of tax evasion (such as urbanization, agriculture share, openness). We evaluate the VAT collection efficiency (VAT revenue over the aggregate consumption divided by the standard VAT rate) in a panel of 44 countries over 1970-99. A one standard deviation increase in durability of political regime, and in the ease and fluidity of political participation, increases the VAT collection efficiency by 3.1% and 3.6%, respectively. A one standard deviation increase in urbanization, trade openness and the share of agriculture, changes the VAT collection efficiency by 12.7%, 3.9% and -4.8%, respectively. Qualitatively identical results apply for the ratio of VAT revenue to GDP divided by the standard VAT.
|Item Type:||Journal Articles|
|SOAS Departments & Centres:||Faculty of Law and Social Sciences > School of Finance and Management|
|DOI (Digital Object Identifier):||10.1080/09638190802137059|
|Depositing User:||Yothin Jinjarak|
|Date Deposited:||05 Jul 2010 10:44|
Accesses by country - last 12 months
Accesses by referrer - last 12 months