Designing a Progressive VAT

April 5, 2024

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Format: Chicago

Artur Swistak, and Rita de la Feria. Designing a Progressive VAT, (USA: International Monetary Fund, 2024) 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

This paper presents a novel approach to addressing VAT regressivity, by proposing the adoption of a progressive VAT: a single-rate, broad-base, VAT, whereby tax paid on consumption is re-paid to lower income households in real-time, at the moment of purchase. Such a system can effectively eliminate regressivity, while minimizing the political economy, cash-flow, and welfare stigma obstacles that are often associated with standard welfare transfers used in modern VAT systems. It would also have other significant advantages, particularly in terms of compliance incentives.

Subject: Consumption, Consumption taxes, Income, Income distribution, National accounts, Taxes, Value-added tax

Keywords: Consumption, Consumption taxes, Global, Income, Income distribution, La Feria, Stigma obstacle, Value-added tax, VAT design, VAT incidence, VAT system

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/078
Stock No:

WPIEA2024078
ISBN:

9798400271830
ISSN:

1018-5941

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