Value Added Tax
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Bibliography
1. Jan B. M. Goossenaerts, Alexander T. M. Zegers, and Jan M. Smits. A multi-level model-driven regime for value-added tax compliance in erp systems. Computers in Industry, 60(9):709–727, December 2009. (draft version at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1367042 )
2. Keen, M., Lockwood, B., August 2007. The value-added tax: Its causes and consequences. IMF Working Paper No. 07/183, also: Social Science Research Network Working Paper Series. URL http://ssrn.com/abstract=1007932
3. Ashta, A., November 2007. Strategic aspects of value added tax (vat). Social Science Research Network Working Paper Series.
URL http://ssrn.com/abstract=1031187

Has the VAT proved, as its proponents claim, an especially effective form of taxation?
To address this [2] first shows that a tax innovation-such as the introduction of a VAT- reduces the marginal cost of public funds if and only if it also leads an optimizing government to increase the tax ratio. This leads to the estimation, on a large panel, of a system of equations describing the probability of VAT adoption and the revenue impact of the VAT. The sign of the revenue impact is generally ambiguous, but most countries that have adopted a VAT seem to have gained a more effective tax instrument in doing so.

Description

Name1 Value Added Tax
Domain
Target Outcome Tax that is proportional to value added in the value chain, and in this way it is fairly distributed over the economic actors creating the value. In adding such value these economic actors rely upon the socio-economic and legal institutions.
Social actors and roles Regulator (enacts VAT regulations); Tax authorities (collects tax); Companies (submitting VAT declarations); ERP vendors (implementing VAT functionality in the enterprise systems); VAT-ERP experts
Trigger or preceding interaction Regulatory Impact Analysis
Interfaces and services VAT collection solutions (increasingly internet based for SMEs)
Inputs and outputs See [1] for full details
Stores and tools ERP Systems [1]
Other characteristics
Part of Socio-economic policy per country, (Value Added) Tax Harmonization internationally
Parts Complex VAT situations may arise in international value chains, as explained for the EU context in [1]
Succeeding Interactions Once enacted and implemented, VAT is most likely to stay as it is a fair manner of taxing economic actors according to the value they add.
Alternatives General Sales Tax is an administratively simpler alternative, and it may have a smaller risk of fraud. Assuming that all buyers are obliged to pay GST, and that sellers cannot reclaim their GST-paid-for-inputs: As the value adding "chain" gets longer (cascading sales tax), it will be charged an increasing amount of tax, which in its turn would render long chains less-competitive - the GST adds transaction-cost. This aspect must then be weighed with the beneficial impact (for economic progress) of the division of labour, and specialization of activity. The VAT puts a limit on the end-to-end tax paid in the chain, the GST doesn't do this (under the given assumption) (see [3] for numeric examples and further related topics).
Action Realm Operations
Risks
Further reading http://www.worx.wiki/vat-erp (in [1] there are further references to how VAT is implemented in the European Union).
Footnotes
page revision: 13, last edited: 15 May 2022 11:10
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