Value-Added Taxes: Lessons Learned from Other Countries on Compliance Risks, Administrative Costs, Compliance Burden, and TransitionDissatisfaction with the fed. tax system has led to a debate about U.S. tax reform, incl. proposals for a nat. consumption tax. One type of proposed consumption tax is a value-added tax (VAT). A VAT is levied on the difference between a bus. sales and its purchases of goods and services. Typically, a bus. calculates the tax due on its sales, subtracts a credit for taxes paid on its purchases, and remits the difference to the gov¿t. This report describes: (1) how VAT design choices, such as exemptions and enforcement mechanisms, have affected compliance, admin. costs, and compliance burden; (2) how countries with fed. systems administer a VAT; and (3) how countries that recently transitioned to a VAT implemented the new tax. Charts. |
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According accounting activities added additional administrative costs agencies allowed amount Appendix applied approximately arrangements assistance audit Australia base businesses calculate Canada carousel fraud certain charge claim collected Company complexity compliance burden compliance risks consumer consumption tax create distribution economic effective entities estimated example exempt existing experts federal VAT Figure financial services France fraudulent housing implementation imports income tax increase industry input tax credits involved issue less million nonprofit officials organizations percent preferences production programs provincial purchases real estate reduced rate refund remit requirements residential result retail returns sales tax selected shows simple VAT sold Source specific standard rate study countries subnational supply Table tax administration tax system taxable threshold transactions types United Kingdom VAT implementation VAT paid VAT revenue VAT Treatment Zealand zero rating zero-rated