Presentation is loading. Please wait.

Presentation is loading. Please wait.

International Tax Dialogue Parallel Session 2: Policy Equity issues VAT and trade liberalization VAT and small islands.

Similar presentations


Presentation on theme: "International Tax Dialogue Parallel Session 2: Policy Equity issues VAT and trade liberalization VAT and small islands."— Presentation transcript:

1 International Tax Dialogue Parallel Session 2: Policy Equity issues VAT and trade liberalization VAT and small islands

2 International Tax Dialogue EQUITY Basic argument: VAT rate differentiation a blunt instrument for equity objectives so better to preserve revenue and use targeted spending instrument

3 International Tax Dialogue Suppose: Rich have ten times the income of poor Poor spend 50 percent of their income on food, rich spend 20 percent Equal numbers of rich and poor Then: For each $100 of VAT revenue foregone by lowering VAT rate on food, only $20 reaches poor Question then is: If we had $100 to spend, could we do it in such a way that poor receive more than $20?

4 International Tax Dialogue Also: Threshold favors small traders Reaches informal sector on inputs (like tariffs) Evidence? Suggests that VAT in developing countries not especially regressive (no more so than tariffs)....reflecting exemptions

5 International Tax Dialogue SMALL ISLANDS VAT works well....but so do tariffs. Issue is: Where most consumption is imported, and little domestic valued-added, is there much gain in moving from tariffs to a VAT plus a few excises?


Download ppt "International Tax Dialogue Parallel Session 2: Policy Equity issues VAT and trade liberalization VAT and small islands."

Similar presentations


Ads by Google