Title VAT, tariffs, and withholding : border taxes and informality in developing countries / prepared by Michael Keen

Published [Washington, D.C.?] : International Monetary Fund, ©2007

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Description 1 online resource (30 pages) Series IMF working paper, 2227-8885 ; WP/07/174 IMF working paper ; WP/07/174. Summary This paper explores the implications of a distinctive feature of the value added tax (VAT) that is stressed by practitioners but essentially ignored by theorists: that it functions, in part, as a tax on the purchases of informal operators from formal sector businesses and, not least, on their imports. It stresses too the potential importance of the creditable withholding taxes that are levied by many developing countries-which have also been ignored. If both of these instruments are optimally deployed, it is shown, then the usual prescription that a small economy should not deploy tariffs remains valid even in the presence of an informal sector; and indeed a simple strategy is established-generalizing the standard prescription developed in models without informality-for deploying these instruments so as to preserve government revenue and increase welfare in the face of efficiency-improving tariff cuts. Conditions are established under which a VAT alone is fully optimal, precisely because it is in part a tax on informal sector production. But they are restrictive: more generally, an efficient tax structure requires deploying both a VAT and withholding taxes Notes "July 2007." Bibliography Includes bibliographical references (pages 29-30) Notes At head of title: Fiscal Affairs Department Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212 MiAaHDL Print version record digitized 2010 HathiTrust Digital Library committed to preserve pda MiAaHDL Subject Value-added tax -- Developing countries -- Econometric models Tariff -- Developing countries -- Econometric models Withholding tax -- Developing countries -- Econometric models Informal sector (Economics) -- Developing countries -- Econometric models Informal sector (Economics) -- Econometric models Tariff -- Econometric models Value-added tax -- Econometric models Developing countries Form Electronic book Author International Monetary Fund. Fiscal Affairs Department ISBN 1283003074 9781283003070 1451911912 9781451911916

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