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The proliferation of exempt supplies in VAT systems, particularly the traditional European VAT, undermines the integrity of the tax in many respects. Exempt supplies bear a tax burden equal to the input tax imposed along the supply chain up to the exempt supply. This leads to overtaxation of business customers and undertaxation of final consumers. The neutrality of a benchmark VAT is replaced by economically inefficient biases and distortions. Unclear borderlines between exempt and taxable supplies increase compliance costs and administration costs. This paper reviews the types of exempt supplies that fall into two broad categories -- merit or concessional exemptions such as those for education or health services, designed to reduce taxation to achieve social benefits, and those adopted for technical reasons including exemptions for immovable property and financial supplies. It explains the origins of the exemptions and explores reform options to bring exempt supplies within the ordinary system of taxable supplies with full input tax recovery for businesses.
Within Europe differentiated rates structures date back to the introduction of VAT itself. Evidence as regards the negative consequences of applying multiple rates has been apparent for some decades. Since the late 1980s, therefore, there have been several attempts to amend European rates structures under the political guidance of the European Commission. Yet, the most recent agreed upon amendments to the rates structure have increased the level of differentiation, rather than decreased it, with more goods and services being subject to reduced rates in Europe today than even as recently as ten years ago. This reality seems to be changing in the last few years. Since 2008, a staggering twenty-two of the twenty-eight EU Member State countries have increased their VAT rates, resulting in a broad convergence of VAT standard rates across the EU around the 21% mark. Furthermore, there has also been a decrease in levels of differentiation with a reduction in number of VAT rates applicable in many Member States, as well as various base broadening measures. The latest developments seem to indicate that conditions may be present which allow the reversal of the status quo bias, creating the opportunity for base broadening tax reform. This raises the possibility that European countries might engage in an involuntary process of convergence of VAT bases, fuelled by domestic necessities. A politically achievable blueprint for reform of VAT rate structures in European is presented, which would result in a broader-based, and thus more efficient and neutral, VAT. Moreover, application of this blueprint across EU Member States would have the additional advantage of resulting in further convergence of VAT rate structures in Europe, to replace the long-sought, but so far unattainable, EU harmonization.
VAT is an important but at the same time long neglected issue in social policy literature. The way in which taxes are levied has important implications for citizens in terms of equity and efficiency effects. Rate diversification is embedded in VAT planning across the EU, which enables Member States to address particular welfare objectives and tackle VAT’s regressivity. Nonetheless, for some, this undermines the uniformity and effectiveness of a pan-European VAT system comprised of the so-called ideal single-rate VAT structure which could bring more money into state budgets and, thus, allow for more generous welfare provision. This paper evaluates arguments put forward by both sides, concluding that in times of crisis, where governments might advance VAT streamlining purely in order to deal with deficit constraints instead of fairer redistribution, the regime currently in place is the most pragmatic solution from a pro-welfare perspective.
This book explores one of the most significant trends in the evolution of global tax systems by asking how, within less than half a century, the value-added tax (VAT) has risen from relative obscurity to become one of the world’s most dominant revenue instruments. Despite its significance, very little is known about why so many countries have adopted the VAT and, in particular, why different countries adopt the types of VAT that they do. The popular mythology provides that the merits of the VAT have underpinned its global spread; however, this book contends that much scholarship on the VAT confuses the question of why the VAT has risen to dominance with the issue of what makes a good VAT. This book combines policy and legal analysis to propose a new way of understanding the rise of this important revenue instrument so as to better reflect the realities of the VATs that are actually implemented.
Value Added Tax and Excises -for the Institute for Fiscal Studies
  • Jan Crawford
  • Michael Keen
  • Stephen Smith
Crawford, Jan, Michael Keen, Stephen Smith. Value Added Tax and Excises -for the Institute for Fiscal Studies, In: Dimensions of Tax Design: the Mirrlees Review. Oxford University Press. 2010, pp. 275 -326.
Кондарев, Ивайло. Промени в ЗДДС, в сила от 01.01.2020 г., наложени от практиката на СЕС и въвеждане на норми от Директивата за ДДС в нашия закон. Счетоводство, данъци и право. ИК Труд и право
  • Francesca Gastaldi
  • Paolo Liberati
  • Elena Pisano
  • Simone Tedeschi
Gastaldi, Francesca, Paolo Liberati, Elena Pisano, Simone Tedeschi. Regressivity-Reducing VAT Reforms.International Journal of Microsimulation. 2017, 10 (1), pp. 39 -72. 10. Кондарев, Ивайло. Промени в ЗДДС, в сила от 01.01.2020 г., наложени от практиката на СЕС и въвеждане на норми от Директивата за ДДС в нашия закон. Счетоводство, данъци и право. ИК Труд и право. 2020 (1), с. 29 -49.