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Value-added Tax (VAT), a turnover tax levied on the value appreciated in commodities production, circulation and sale, has been widely practiced by economies worldwide for its neutrality. From the international perspective, European Union VAT and New Zealand VAT stand out as characteristic models of VAT development and reform history. With changing economic development models and the growth of e-commerce businesses, VAT systems have been upgraded to meet taxation challenges brought about by the digital economy. Recently, VAT policies and measures have been introduced particularly to combat the COVID-19 impact. In China, the VAT system has been reformed constantly over the past 40 years and has been converging with international practice. China now needs to address emerging VAT issues through legislation, tax incentives, and tax-rate grades so as to meet challenges in VAT collection and management and to suit the “new normal” of economic development.

We offer a formal model of corporate income tax evasion. While individual tax evasion is essentially a portfolio-selection problem, corporate income tax evasion is much more complicated. When the owner of a firm decides to evade taxes, not only does she risk being detected by the tax authorities, more importantly, the optimal compensation scheme offered to the employees will also be altered. Specifically, due to the illegal nature of tax evasion, the contract offered to the manager is necessarily incomplete. This creates a distortion in the manager's effort and reduces the efficiency of the contract. Tax evasion thus increases the profit retained by the firm not only at the risk of being detected, but also at the cost of efficiency loss in internal control.

China, the world’s largest carbon emitter, urgently needs to improve its carbon emissions efficiency. This study analyzes the impact of tax policy on total factor carbon emission efficiency (TFCEE). Using the Value Added Tax (VAT) reform in China as an exogenous shock and undesirable-SBM model to measure the total factor carbon emission efficiency of 282 cities in China from 2003 to 2019, our multiple difference-in-difference (DID) estimates show that VAT reform significantly improves the TFCEE in the city level. These potential mechanisms show that VAT reform has promoted upgrading industrial structures, stimulated technological innovation, improved human capital, introduced FDI through four channels, and enhanced the TFCEE. The heterogeneity study found that VAT reform has a higher effect on promoting TFCEE in coastal and large megacities than in inland and small and medium-sized cities. This study provides a theoretical basis for policy instruments to improve energy efficiency and the environment.

This paper examines how small firms respond to the VAT registration threshold in the context of high informality. Using the panel of VAT and corporate income tax return data from Thailand, we study bunching response at the threshold, examine the role of informality, and investigate growth effects. We find that Thai firms respond strongly to the notch with the bunching pattern consistent with the incentive at the threshold. We also present suggestive evidence that highlights the VAT informality (defined as the presence of non-VAT firms) as a key incentive underlying the bunching response. Finally, our findings indicate that the threshold provides a brake on small business growth. We demonstrate that firms not registered for VAT have significantly lower growth rate than a propensity score-matched group of firms that voluntarily registered. Such effects are stronger for firms closer to the threshold with part of them likely driven by misreporting. These findings have important implications for the VAT threshold policy in developing countries and are widely applicable since the size-dependent thresholds are commonly applied to small businesses.

In public finance, estimation of tax potential of a government—either federal or provincial—has immense importance to understand future streams of tax revenue. Tax potential depends on tax capacity and tax effort (TE) and, therefore, joint estimation of both the functions is desirable. There are several frameworks to estimate tax capacity and tax efficiency (tax effort); in the present paper, time-variant-truncated panel Stochastic Frontier Approach (SFA) is adopted to estimate the functions jointly for the period 2012–13 to 2019–20. The findings of the study could be useful for policy and especially for the sitting Fifteen Finance Commission. The results of the study show that GST capacity of states depends on size and structural composition of the economy. Introduction of GST has reduced states’ GST capacity and the impact is restricted to scale only. The study has used data from GST Network (GSTN) database for the post-GST period and given all other factors at their levels, GSTN data show lower GST capacity for high-income states and higher capacity for low-income states. The relationship between per capita income (PCI) of states and tax efficiency is non-linear and as PCI rises, TE falls and thereafter it rises. Minor states (special category states and UTs with legislative assembly) have lower tax efficiency. Delhi and Goa have the highest GST gap and on average major states could increase their GST collection by 0.52 percent of GSVA and minor states by 1.15% if they increase their tax efforts.

The utilization of new technology in the form of blockchain technology for a Value Added Tax (VAT) acceptance system is relatively new and has not been widely encountered thus far. This research analyzes how blockchain technology can be applied to a VAT system, particularly for electronic invoices (e-Invoice). A qualitative approach was used in this study to analyze blockchain technology models that could be applied in a VAT system. The results of this study indicate that due to its characteristics, blockchain technology can only be applied to taxpayer data that do not require privacy. Data that are considered safe if distributed to nodes in the blockchain technology network include the Tax Invoice Serial Number (TISN). A TISN system based on blockchain technology will produce a faster and more efficient system. Transactions on the TISN in Indonesia can also be monitored and tracked directly by the Directorate General of Taxation (DGT). Blockchain technology can be applied in the TISN system by using a permissioned private blockchain type.

This paper regards the uncredited value-added tax (VAT) refund policy promulgated in 2018 as an exogenous shock to improve the neutrality for VAT. Based on the statistics of listed companies in the non-financial sectors from 2013 to 2020, this paper applies the difference-in-differences (DID) approach to study the impact of the uncredited VAT refund policy on corporate cash holdings. The study finds that the policy has eased the impact of non-tax-neutral impact of non-refundable tax credits and lowered the level of corporate cash holdings. Furthermore, the analysis of capital sources verified that the policy has optimized the corporate capital conditions. These findings have proved to be robust after a series of tests. At the level of cross-sectional differences, the uncredited VAT refund policy exerts both “resource effect” and “signal effect”, enabling companies to reduce cash holdings in the dimensions of both tax endowment and market expectation. At the level of policy effects, the policy improved the corporate behavior of high cash holdings for the production and operation cycle, with more notable impact on enterprises with higher tax credit rating. At the level of economic consequences, the adjustment of corporate cash holdings induced by uncredited VAT refund policy has significantly improved operating performance and reduced performance volatility, with a greater impact on enterprises with high capital intensity. The research findings evaluate the uncredited VAT refund policy from the perspective of tax neutrality, laying a theoretical foundation for further optimizing the uncredited VAT refund policy and the modern fiscal, tax and financial systems.

This study empirically analysed the class ruling at two South African universities. The principles underpinning the Canons of Taxation, Consumption Theory, and the Principle of Neutrality were reviewed as analytical benchmarks. The literature review synthesised prior studies that examined the ruling or explored apportionment practices within universities. A sequential mixed-methods approach was adopted, beginning with a quantitative phase followed by a qualitative phase. Quantitative data were collected from thirty (37) university staff members through an online questionnaire, and descriptive statistical analysis was conducted using SPSS (version 29). The qualitative phase involved online interviews with ten (10) tax and finance professionals engaged in apportionment practices at universities, capturing their experiences, perspectives, and insights. The data were analysed using thematic and transcript analysis with the aid of NVivo (version 20). The findings indicate that respondents believe the South African Revenue Service should revisit and improve the existing ruling. Concerns were raised regarding the lack of continuous training at universities, cost implications, and the complexity of Value-Added Tax apportionment. In the context of a rapidly evolving higher education sector, the VAT Act and the definition of educational services appear to require reform. Based on these findings, the study recommends that SARS consider revising the ruling by removing a prescribed apportionment rate and allowing universities to adopt methods that are practical and aligned with their operational contexts. Consistent with prior research, the study also finds that the input-based method remains complex, and that the definition of Value-Added Tax within the educational sector is overly broad.

We present new data on effective corporate income tax rates in 85 countries in 2004. The data come from a survey, conducted jointly with PricewaterhouseCoopers, of all taxes imposed on \"the same\" standardized mid-size domestic firm. In a cross-section of countries, our estimates of the effective corporate tax rate have a large adverse impact on aggregate investment, FDI, and entrepreneurial activity. Corporate tax rates are correlated with investment in manufacturing but not services, as well as with the size of the informal economy. The results are robust to the inclusion of many controls.

While a value-added tax (VAT), which supports a welfare state, was officially introduced in Japan in 1989, earlier attempts to implement this tax system failed. This study looks in-depth at why Japan was slower than other countries to implement a VAT. The tax authorities’ debates during the 1960s and 1970s are reviewed to understand why other attempts to introduce a VAT failed. Implementing the VAT would require a shift from the ideology centering on a direct tax to acceptance of indirect taxes and justification for a general consumption tax’s superiority over specific consumption taxes. Four influential factors are identified. First, in 1960, the ideology centering on a direct tax made a VAT inherently inferior. Second, in the 1968, “Break Fiscal Rigidification Campaign” created a revenue-neutral path for indirect tax increases but favored specific consumption taxes. Third, the Fundamental Issues Subcommittee conceptualized “high benefit/high cost” in the early 1970s and established the VAT’s superiority over specific consumption taxes based on a study of overseas travel to European Commission countries. However, the VAT was abandoned due to external shocks. Fourth, the attempts to link the VAT with fiscal reconstruction in the late 1970s faced strong opposition from consumers, small businesses, and the ruling party. Failure to introduce the VAT in the 1970s eliminated the possibility of using it to raise taxes in the early 1980s. The findings reveal that Japan’s failure to introduce the VAT closed a door to a “high benefit/high cost” type of Western-style welfare state.