IMF Working Papers

Estimating the Base of the Value-Added Tax (VAT) in Developing Countries: The Problem of Exemptions

By George A Mackenzie

February 1, 1991

Download PDF More Formats on IMF eLibrary Order a Print Copy
More formats on IMF eLibrary Order a Print Copy

Preview Citation

Format: Chicago

George A Mackenzie. "Estimating the Base of the Value-Added Tax (VAT) in Developing Countries: The Problem of Exemptions", IMF Working Papers 1991, 021 (1991), accessed December 21, 2024, https://doi.org/10.5089/9781451921465.001

Export Citation

  • ProCite
  • RefWorks
  • Reference Manager
  • BibTex
  • Zotero
  • EndNote
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Developing countries with VATs typically exempt a large number of goods and services. Following a brief discussion of the rationale for exemptions, this paper presents a formula for the base of a VAT with exemptions. Two basic adjustments must be made to the base without exemptions: subtraction of the value of sales to consumers of exempt industries and addition of intermediate sales of taxable inputs to exempt industries. The paper concludes with a derivation of the elasticity of a VAT with exemptions with respect to aggregate consumption and a discussion of the implications of technological change for the VAT base.

Subject: Consumption, Consumption taxes, Effective tax rate, National accounts, Tax policy, Taxes, Value-added tax, VAT exemptions

Keywords: Capital goods, Consumption, Consumption taxes, Consumption-type VAT, Effective tax rate, Intermediate sale, N products, Tax liability, Taxed goods, Value-added tax, VAT base, VAT exemptions, WP

Publication Details

You May Also Be Interested In...

Jordan: 2024 Article IV Consultation, Second Review Under the Extended Arrangement Under the Extended Fund Facility, and Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Jordan

December 17, 2024

The Dynamics of Trade Integration and Fragmentation in LAC

December 13, 2024

Chad: Selected Issues

December 12, 2024

Republic of San Marino: 2024 Article IV Consultation-Press Release and Staff Report

December 10, 2024