The Evolution of Potential VAT Revenues and C-Efficiency in Advanced Economies

July 11, 2017

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Junji Ueda. The Evolution of Potential VAT Revenues and C-Efficiency in Advanced Economies, (USA: International Monetary Fund, 2017) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

To understand the cyclical movements of value-added tax (VAT) revenues in advanced economies, this paper analyzes changes in the C-efficiency ratio by decomposing it into changes in the compliance and policy gaps between 2000 and 2014. The results from a panel of EU member countries and Japan suggest that the cyclicality of C-efficiency is explained by the correlation of both gaps with the output gap. The cyclicality of the compliance gap appears to be short lived, and larger in countries with high compliance gaps. The cyclicality of the policy gaps largely reflects not changes in policy parameters, but rather, behavior-induced changes, notably in government consumption and, to a lesser degree, in the composition of household consumption.

Subject: Consumption, National accounts, Output gap, Production, Revenue performance assessment, Tax efficiency, Tax gap, Taxes, Value-added tax

Keywords: C-efficiency ratio, Compliance gap, Consumption, Elasticity of tax revenue, Output gap, Revenue performance, Tax compliance, Tax efficiency, Tax gap, Value-added tax, VAT base, VAT revenue, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/158
Stock No:

WPIEA2017158
ISBN:

9781484305874
ISSN:

1018-5941

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