Data and Code for: Does the Value-Added Tax Add Value? Lessons Using Administrative Data from a Diverse Set of Countries

Principal Investigator(s): View help for Principal Investigator(s) Anne Brockmeyer, World Bank; Giulia Mascagni, Institute of Development Studies, International Centre for Tax and Development; Vedanth Nair, Institute for Fiscal Studies; Mazhar Waseem, University of Manchester; Miguel Almunia, CUNEF Universidad

Version: View help for Version V1

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Project Citation:

Brockmeyer, Anne , Mascagni, Giulia , Nair, Vedanth, Waseem, Mazhar , and Almunia, Miguel . Data and Code for: Does the Value-Added Tax Add Value? Lessons Using Administrative Data from a Diverse Set of Countries. Nashville, TN: American Economic Association [publisher], 2024. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2024-01-30. https://doi.org/10.3886/E195161V1

Project Description

Summary: The value-added tax is a cornerstone of modern tax systems around the world. It has many desirable properties in theory: it does not distort firms’ production decisions, it is difficult to evade, and it generates a substantial amount of revenue. Yet, in many countries there are discrepancies between the textbook model of the VAT and its practical implementation. Where the VAT implementation diverges from its textbook model, the tax may lose its desirable properties. We draw on firm-level administrative VAT records from 11 countries at different income levels to examine the functioning of real-world VAT systems. We document four stylized facts that capture departures from the textbook VAT model which are particularly pronounced in lower-income countries. We discuss the effects on VAT performance and simulate a counterfactual retail sales tax and a turnover tax. Despite its shortcomings, we conclude that the real-world VAT is superior to the alternatives.

Funding Sources: Fundación Ramón Areces; UKRI (MR/V025058/1); UKAID (GV00136.0000)

Scope of Project

Subject Terms: VAT; development; production efficiency; evasion; firm behaviour

JEL Classification:
      H25 Business Taxes and Subsidies including sales and value-added (VAT)
      H26 Tax Evasion and Avoidance
      H32 Fiscal Policies and Behavior of Economic Agents: Firm

Geographic Coverage: eSwatini, Pakistan, Hungary, Senegal, Rwanda, Guatemala, Uganda, Honduras, France, Ethiopia, Costa Rica

Time Period(s): 1/1/2005 – 12/31/2019 (Varies across countries. The earliest year is 2005, the latest is 2019. )

Collection Date(s): 1/1/2005 – 12/31/2019

Universe: All VAT-registered firms in France, Hungary, Ethiopia, eSwatini, Rwanda, Uganda, Pakistan, Senegal, Costa Rica, Honduras and Guatemala.

Data Type(s): administrative records data; aggregate data

Collection Notes: The tax micrdata is not made publicly available.

Methodology

Response Rate: NA

Sampling: NA

Data Source: Administrative VAT records. See README for full data citation.

Collection Mode(s): other

Unit(s) of Observation: VAT registered firms

Geographic Unit: NA

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Published Versions

V1 [2024-01-30]

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