Pub Date : 2019-07-12DOI: 10.1093/oso/9780198844075.003.0017
S. Cnossen
Chapter 17 reviews various related but separable core administrative functions associated with the VAT: registration, filing, payment/collection, enforcement, and audit. It concludes with a brief note on fraud. How well these functions are performed will determine the VAT’s economic effects, its burden distribution, and its administrative efficacy (in terms of collection and compliance costs per unit of revenue). The discussion highlights the key issues and outlines some best practices. Last but not least, measures aimed at uncovering and prosecuting VAT fraud should be balanced by measures aimed at assisting honest taxpayers to meet their tax obligations and fast-tracking refunds to taxpayers with a good compliance record. Importantly, interest at commercial rates should be paid on late refunds.
{"title":"Basic Administrative Processes","authors":"S. Cnossen","doi":"10.1093/oso/9780198844075.003.0017","DOIUrl":"https://doi.org/10.1093/oso/9780198844075.003.0017","url":null,"abstract":"Chapter 17 reviews various related but separable core administrative functions associated with the VAT: registration, filing, payment/collection, enforcement, and audit. It concludes with a brief note on fraud. How well these functions are performed will determine the VAT’s economic effects, its burden distribution, and its administrative efficacy (in terms of collection and compliance costs per unit of revenue). The discussion highlights the key issues and outlines some best practices. Last but not least, measures aimed at uncovering and prosecuting VAT fraud should be balanced by measures aimed at assisting honest taxpayers to meet their tax obligations and fast-tracking refunds to taxpayers with a good compliance record. Importantly, interest at commercial rates should be paid on late refunds.","PeriodicalId":376121,"journal":{"name":"Modernizing VATs in Africa","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125543929","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-07-12DOI: 10.1093/oso/9780198844075.003.0005
S. Cnossen
Chapter 5 surveys the sales taxes of African countries that do not (yet) have a VAT and analyses the distortions, valuation problems, and definitional issues caused by these taxes. Although VAT is not without problems either—in design but particularly in administration—it appears to emerge as a superior consumption tax to the regimes currently in force in the non-VAT countries, such as Angola, Liberia, and Nigeria. But while a VAT can be potentially well designed and administered, by definition production taxes will always be plagued by distortions, valuation problems, and definitional complexities. In short, a VAT can, but other sales taxes cannot, be improved.
{"title":"Countries without VAT","authors":"S. Cnossen","doi":"10.1093/oso/9780198844075.003.0005","DOIUrl":"https://doi.org/10.1093/oso/9780198844075.003.0005","url":null,"abstract":"Chapter 5 surveys the sales taxes of African countries that do not (yet) have a VAT and analyses the distortions, valuation problems, and definitional issues caused by these taxes. Although VAT is not without problems either—in design but particularly in administration—it appears to emerge as a superior consumption tax to the regimes currently in force in the non-VAT countries, such as Angola, Liberia, and Nigeria. But while a VAT can be potentially well designed and administered, by definition production taxes will always be plagued by distortions, valuation problems, and definitional complexities. In short, a VAT can, but other sales taxes cannot, be improved.","PeriodicalId":376121,"journal":{"name":"Modernizing VATs in Africa","volume":"2009 17","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114127316","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-07-12DOI: 10.1093/oso/9780198844075.003.0014
S. Cnossen
Chapter 14 shows that insurance can be included in the VAT base by taxing premiums and imputing a VAT credit to indemnifications. Instead of taxing insurance, African countries, following EU practice, exempt insurance and impose various insurance (premium) taxes (francophone countries) or stamp duties (anglophone countries other than SACU countries). The chapter argues that exemption and separate taxation are administratively complex and distortionary elements in the tax systems of African countries. As shown by the South African experience, inclusion in the VAT base of property and casualty insurance is feasible, and is simpler and more efficient than the current systems. Full taxation would be more difficult for life and health insurance, which, if desired, can be taxed under the addition method. The last section summarizes the taxable status of insurance services under present arrangements and under the proposed approach.
{"title":"Insurance","authors":"S. Cnossen","doi":"10.1093/oso/9780198844075.003.0014","DOIUrl":"https://doi.org/10.1093/oso/9780198844075.003.0014","url":null,"abstract":"Chapter 14 shows that insurance can be included in the VAT base by taxing premiums and imputing a VAT credit to indemnifications. Instead of taxing insurance, African countries, following EU practice, exempt insurance and impose various insurance (premium) taxes (francophone countries) or stamp duties (anglophone countries other than SACU countries). The chapter argues that exemption and separate taxation are administratively complex and distortionary elements in the tax systems of African countries. As shown by the South African experience, inclusion in the VAT base of property and casualty insurance is feasible, and is simpler and more efficient than the current systems. Full taxation would be more difficult for life and health insurance, which, if desired, can be taxed under the addition method. The last section summarizes the taxable status of insurance services under present arrangements and under the proposed approach.","PeriodicalId":376121,"journal":{"name":"Modernizing VATs in Africa","volume":"155 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128155883","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-07-12DOI: 10.1093/oso/9780198844075.003.0006
S. Cnossen
Chapter 6 examines the revenue performance of African VATs by calculating their collection efficiencies defined as actual VAT revenue as a fraction of potential revenue. The VAT gap consists of the policy gap (exemptions and reduced rates) and the compliance gap (evasion and lack of enforcement). Possible explanatory factors, such as the level of economic development, the VAT structure, and the effectiveness of the VAT administration, are reviewed. The analysis appears to indicate that it is unlikely that African VATs in their current form are up to the task of generating much more revenue. Further, replacement of trade taxes by VATs is not easy if VAT bases are too narrow and enforcement too shallow to put much trust in VAT’s revenue-raising capacity.
{"title":"Revenue Performance","authors":"S. Cnossen","doi":"10.1093/oso/9780198844075.003.0006","DOIUrl":"https://doi.org/10.1093/oso/9780198844075.003.0006","url":null,"abstract":"Chapter 6 examines the revenue performance of African VATs by calculating their collection efficiencies defined as actual VAT revenue as a fraction of potential revenue. The VAT gap consists of the policy gap (exemptions and reduced rates) and the compliance gap (evasion and lack of enforcement). Possible explanatory factors, such as the level of economic development, the VAT structure, and the effectiveness of the VAT administration, are reviewed. The analysis appears to indicate that it is unlikely that African VATs in their current form are up to the task of generating much more revenue. Further, replacement of trade taxes by VATs is not easy if VAT bases are too narrow and enforcement too shallow to put much trust in VAT’s revenue-raising capacity.","PeriodicalId":376121,"journal":{"name":"Modernizing VATs in Africa","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130031567","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-07-12DOI: 10.1093/oso/9780198844075.003.0009
S. Cnossen
Chapter 9 draws up a taxonomy of standard and non-standard exclusions, exemptions, and zero rates, highlights the distortions caused by them and the administrative complexities to which they give rise. Broadly, it compares the treatment of various exemptions in the EU, which have also been adopted by most African countries, with their treatment under New Zealand’s GST and South Africa’s VAT. For political or administrative reasons, all VATs exempt or exclude specified goods, services, activities, entities, or sectors, but most African VATs go much further down this road than accords with VAT’s functionality and logic. Exemptions and exclusions are truly the Achilles heel of the VAT.
{"title":"Exemptions and Exclusions","authors":"S. Cnossen","doi":"10.1093/oso/9780198844075.003.0009","DOIUrl":"https://doi.org/10.1093/oso/9780198844075.003.0009","url":null,"abstract":"Chapter 9 draws up a taxonomy of standard and non-standard exclusions, exemptions, and zero rates, highlights the distortions caused by them and the administrative complexities to which they give rise. Broadly, it compares the treatment of various exemptions in the EU, which have also been adopted by most African countries, with their treatment under New Zealand’s GST and South Africa’s VAT. For political or administrative reasons, all VATs exempt or exclude specified goods, services, activities, entities, or sectors, but most African VATs go much further down this road than accords with VAT’s functionality and logic. Exemptions and exclusions are truly the Achilles heel of the VAT.","PeriodicalId":376121,"journal":{"name":"Modernizing VATs in Africa","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133499944","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-07-12DOI: 10.1093/oso/9780198844075.003.0011
S. Cnossen
Chapter 11 discusses the EU legacy of taxing public bodies, illustrated by the African experience. The EU’s out-of-scope approach is bedevilled by distortions arising from the self-supply bias, the investment disincentive, and, somewhat more remotely, unfair competition vis-à-vis the private sector. Outside Africa, countries with VAT have addressed these issues differently. Various EU countries and Canada, for example, have designed input tax refund mechanisms to eliminate the self-supply bias and the investment disincentive. Still other countries, such as New Zealand, tax governments and activities in the public interest in full and have thus come to terms with the unfair competition issue, too. A concluding section summarizes the characteristics and effects of the various approaches and attempts to formulate a recommendation for African countries.
{"title":"Governments and Activities in the Public Interest","authors":"S. Cnossen","doi":"10.1093/oso/9780198844075.003.0011","DOIUrl":"https://doi.org/10.1093/oso/9780198844075.003.0011","url":null,"abstract":"Chapter 11 discusses the EU legacy of taxing public bodies, illustrated by the African experience. The EU’s out-of-scope approach is bedevilled by distortions arising from the self-supply bias, the investment disincentive, and, somewhat more remotely, unfair competition vis-à-vis the private sector. Outside Africa, countries with VAT have addressed these issues differently. Various EU countries and Canada, for example, have designed input tax refund mechanisms to eliminate the self-supply bias and the investment disincentive. Still other countries, such as New Zealand, tax governments and activities in the public interest in full and have thus come to terms with the unfair competition issue, too. A concluding section summarizes the characteristics and effects of the various approaches and attempts to formulate a recommendation for African countries.","PeriodicalId":376121,"journal":{"name":"Modernizing VATs in Africa","volume":"299 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121321555","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-07-12DOI: 10.1093/oso/9780198844075.003.0002
S. Cnossen
Chapter 2 dwells briefly on the workings and the legal and economic nature of the VAT, and enumerates the characteristics of a best-practice VAT against which existing regimes are evaluated. A best-practice VAT includes all goods and services in its base, unless specifically exempted on administrative grounds, and covers all stages of production and distribution, including the retail stage. It is levied at a single, uniform rate and eliminates cascading or cumulative tax effects by granting taxable firms a full and immediate tax credit or deduction for the tax paid in respect of purchases from other taxable firms. Furthermore, the VAT is destination-based by zero-rating exports and taxing imports. A best-practice VAT limits administrative and taxpayer discretion to a minimum and is based on self-assessment. The tax administration’s task should be confined mainly to providing taxpayer education, monitoring late filers and late payers, and, particularly, auditing taxable persons’ accounts.
{"title":"What is VAT?","authors":"S. Cnossen","doi":"10.1093/oso/9780198844075.003.0002","DOIUrl":"https://doi.org/10.1093/oso/9780198844075.003.0002","url":null,"abstract":"Chapter 2 dwells briefly on the workings and the legal and economic nature of the VAT, and enumerates the characteristics of a best-practice VAT against which existing regimes are evaluated. A best-practice VAT includes all goods and services in its base, unless specifically exempted on administrative grounds, and covers all stages of production and distribution, including the retail stage. It is levied at a single, uniform rate and eliminates cascading or cumulative tax effects by granting taxable firms a full and immediate tax credit or deduction for the tax paid in respect of purchases from other taxable firms. Furthermore, the VAT is destination-based by zero-rating exports and taxing imports. A best-practice VAT limits administrative and taxpayer discretion to a minimum and is based on self-assessment. The tax administration’s task should be confined mainly to providing taxpayer education, monitoring late filers and late payers, and, particularly, auditing taxable persons’ accounts.","PeriodicalId":376121,"journal":{"name":"Modernizing VATs in Africa","volume":"47 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115049165","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-01-15DOI: 10.1787/int_trade-v2018-3-table94-en
S. Cnossen
As shown in Chapter 13, the appropriate treatment of financial services is the single most important design issue that remains to be solved under the VAT. Conventional wisdom holds that margin-based financial services, as opposed to fee-based services, cannot be included in the VAT base calculated on the tax credit method. For this reason, most countries with a VAT exempt financial services entirely, whether margin-based or fee-based. To limit the effects of the rather broad EU type of exemption, two kinds of modifications have been adopted. First, the reach of the full exemption has been narrowed down by taxing fee-based financial services. Second, the cascading effects of the exemption have been mitigated by zero-rating the provision of financial services to registered businesses, providing for partial input VAT recovery. The chapter concludes by drawing some lessons from the analysis which may be useful for African countries.
{"title":"Financial Services","authors":"S. Cnossen","doi":"10.1787/int_trade-v2018-3-table94-en","DOIUrl":"https://doi.org/10.1787/int_trade-v2018-3-table94-en","url":null,"abstract":"As shown in Chapter 13, the appropriate treatment of financial services is the single most important design issue that remains to be solved under the VAT. Conventional wisdom holds that margin-based financial services, as opposed to fee-based services, cannot be included in the VAT base calculated on the tax credit method. For this reason, most countries with a VAT exempt financial services entirely, whether margin-based or fee-based. To limit the effects of the rather broad EU type of exemption, two kinds of modifications have been adopted. First, the reach of the full exemption has been narrowed down by taxing fee-based financial services. Second, the cascading effects of the exemption have been mitigated by zero-rating the provision of financial services to registered businesses, providing for partial input VAT recovery. The chapter concludes by drawing some lessons from the analysis which may be useful for African countries.","PeriodicalId":376121,"journal":{"name":"Modernizing VATs in Africa","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-01-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117229522","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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