The development and testing of a diagnostic tool for assessing VAT compliance costs : pilot study findings

Abstract

This article presents the findings of a pilot research project designed to evaluate the merits of a prototype diagnostic tool for gauging the nature and likely overall incidence of value added tax (VAT) compliance costs at the country level, and to assess its use in comparative cross-country assessments to promote reform. The project was conducted across 13 countries, representing a mix of advanced and developing economies from all continents.1 Drawing on feedback from participants in the project, the findings appear broadly aligned with community and government expectations, and participants were generally of the view that the tool displays merit in assessing the likely aggregate (or relative) VAT compliance burden and its main drivers. The VAT diagnostic tool survey undertaken as part of the pilot also sought to gather insights into the degree of government and institutional recognition and attention being given to address tax compliance costs as a means of gauging a sense of the ‘maturity’ of each country’s approach to compliance burden management, which was found to be weak in a number of the participating countries.