Designing a Progressive VAT
Author: Artur Swistak
Publisher: International Monetary Fund
Published: 2024-04-05
Total Pages: 31
ISBN-13:
DOWNLOAD EBOOKThis paper presents a novel approach to addressing VAT regressivity, by proposing the adoption of a progressive VAT: a single-rate, broad-base, VAT, whereby tax paid on consumption is re-paid to lower income households in real-time, at the moment of purchase. Such a system can effectively eliminate regressivity, while minimizing the political economy, cash-flow, and welfare stigma obstacles that are often associated with standard welfare transfers used in modern VAT systems. It would also have other significant advantages, particularly in terms of compliance incentives.