The C-inefficiency of the EU-VAT and what can be done about it

dc.contributor.authorCnossen, Sijbren
dc.date.accessioned2022-04-11T10:03:10Z
dc.date.available2022-04-11T10:03:10Z
dc.date.issued2022-02
dc.descriptionA preliminary draft of this paper was presented at the online congress of the International Institute of Public Finance held in Reykjavik, Iceland, August 23, 2020.en_US
dc.description.abstractIt is widely agreed that in countries without major constraints on administrative capacity, a value-added tax (VAT) should tax all goods and services at a uniform rate. In these countries, VAT’s C-efficiency, that is, actual revenue over potential revenue, should be one if compliance is perfect. Under this approach, VAT’s C-inefficiency— the aggregate of the policy gap (exemptions, reduced rates, thresholds) and the compliance gap (revenue shortfalls due to laps in compliance and implementation)— is treated as a residual. This contribution shows that calculating VAT’s C-inefficiency independently of its C-efficiency produces a more telling benchmark, particularly of the policy gap. This is illustrated by an analysis of the revenues of the Dutch VAT, which, given the common VAT directive, should be representative of the VATs in other European Union Member States. The large policy gap, hovering around 0.50, forms the background for exploring three options to improve VAT’s performance: reforming the common directive, ceding VAT design to Member States, and introducing a common modern VAT which can be piggybacked by Member States.en_US
dc.description.departmentEconomicsen_US
dc.description.librarianam2021en_US
dc.description.urihttp://link.springer.com/journal/10797en_US
dc.identifier.citationCnossen, S. The C-inefficiency of the EU-VAT and what can be done about it. International Tax and Public Finance, 29, 215–236 (2022). https://doi.org/10.1007/s10797-021-09683-0.en_US
dc.identifier.issn0927-5940 (print)
dc.identifier.issn1573-6970 (online)
dc.identifier.other10.1007/s10797-021-09683-0
dc.identifier.urihttps://repository.up.ac.za/handle/2263/84863
dc.language.isoenen_US
dc.publisherSpringeren_US
dc.rights© The Author(s) 2021. Open Access. This article is licensed under a Creative Commons Attribution 4.0 International License.en_US
dc.subjectExemptionsen_US
dc.subjectTax reformen_US
dc.subjectC-efficiencyen_US
dc.subjectValue added tax (VAT)en_US
dc.subjectEuropean Union (EU)en_US
dc.titleThe C-inefficiency of the EU-VAT and what can be done about iten_US
dc.typeArticleen_US

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