营业税改增值税英文文献

营业税改增值税英文文献 Comparing the Value-Added Tax to the Retail Sales Tax For Richard F. Dye , Therese J. McGuire Journal of Public Economics April 2011 Overview of VAT More than 130 countries use VAT as a key source of government revenue. VAT is a general, broad-based consumption tax assessed on the value added to goods and services. VAT is generally levied on value added at every stage of production, with a mechanism allowing the sellers a credit for the tax they have paid on their own purchases of goods and services (input tax) against the taxes collected on their sales of goods and service (output tax). Generally, VAT is: A general tax that applies to all commercial activities involving the production and distribution of goods and the provision of services; A consumption tax ultimately borne by the consumer; An indirect tax levied on the consumer as part of the price of goods or services; A multistage tax visible at each stage of the production and distribution chain; and A fractionally collected tax that uses a system of partial payments whereby a seller charges VAT on all of its sales with a corresponding claim of credit for VAT that it has been charged on all of its purchases. There are three methods of calculating VAT liability: the credit-invoice method, the subtraction method, and the addition method. This column deals with only the credit-invoice method, which is the most widely used. The credit-invoice method highlights the VAT defining feature: the use of output tax (tax collected on sales) and input tax (tax paid on purchases). A taxpayer generally computes its VAT liability as the difference between the VAT charged on taxable sales and the VAT paid on taxable purchases. This method requires the use of an invoice that separately lists the VAT component of all taxable sales. The sales invoice for the seller becomes the purchase invoice of the buyer. The sales invoice shows the output tax collected and the purchase invoice shows the input tax paid. To summarize, taxpayers use the credit-invoice method to calculate the amount of VAT to be remitted to the taxing authorities in the following manner: Aggregate the VAT shown in the sales invoices (output tax); Aggregate the VAT shown in the purchase invoices (input tax); Subtract the input tax from the output tax and remit any - - 1 balance to the government; and In the event the input tax is greater than the output tax. The United States is the only member of the Organization of Economic Cooperation and Development that does not levy a VAT on a national level; however, VAT has become widely recognized as an important option in federal tax reform debates. Indirect taxes such as value added taxes (VAT) generate a substantial part of tax revenue in many countries. In fact, VAT systems generate a quarter of the world’s tax revenue. Nearly 130 countries now have a VAT system (with over 70 countries having adopted the system during the last 10 years) (Keen and Mintz 2004). More focus on internationally mobile tax bases has drawn attention to directing more of the tax burden to indirect taxes such as consumption taxes or VAT systems, and less to income taxes, especially capital income (Gordon and Nielsen 1997). During the harmonization of EU taxes, indirect taxes, and VAT systems received much attention (Fehr et al. 1995). A general VAT law covering all private goods and services characterizes the current EU system, but there are still many exemptions from this general instruction.Such a VAT system also exists in Norway as a consequence of the Norwegian VAT reform in 2001. The reform introduced a general VAT law on services, but many exemptions are still speci,ed. There are several arguments in favor of a general and uniform VAT system, compared with imperfect, nonuniform (and nongeneral) systems. Such a system may improve economic ef,ciency and reduce administration costs, rent-seeking and fraud activities by industries that lobby for lower rates and zero ratings (Keen and Smith 2006). A general and uniform VAT system equals a uniform consumer tax on all goods and services. Such a system also implies that the producers’ net VAT rate on material inputs equals zero, irrespective of the rate structure. This is optimal according to the production ef,ciency theorem (Diamond and Mirrlees 1971a, 1971b).A VAT system with exemptions violates the production ef,ciency theorem because taxation of intermediates will differ between industries. On the other hand, industries that are covered by the VAT system but have lower rates or zero ratings on their sales are favored because they can withdraw expenditures to VAT on intermediates at full rates and only levy reduced or zero rates on their sales. A general and uniform VAT system may also have positive effects on the distribution of welfare among households. If the initial situation is characterized by a VAT on most goods but only on a few services, the introduction of a uniform rate on all goods and services may improve the distribution of welfare because services’ share of consumption increases with income. Keen (2007) points to the lack of interest in value added taxation from the theoretical second-best literature in spite of the VAT’s popularity in practical tax policy. As mentioned - - 2 above, VAT systems are in general not uniform. Theoretical analyses demand relatively simple models and simple tax structures to be analytically tractable.In practical policies, the structures of the economy and the tax systems are quite complex, and there is a need for detailed numerical models in order to analyze the effects of different VAT systems. This paper contributes to the literature by analyzing the welfare effects of an imperfect extension of a nonuniform VAT system, and comparing different imperfect, nonuniform VAT systems with a uniform and general VAT system within an empirically based dynamic computable general equilibrium (CGE) model for a small open economy. This model mirrors a real economy, Norway, and differs in many respects from the more simple theoretical models that ful,ll the assumptions of normative tax theory and recommend uniform commodity taxes, combined with no input taxation. In our analyses, we ask the following questions. Can the introduction of a nonuniform VAT system including only some services make the economy worse off than having a VAT system only covering goods and in that case, why? Such reforms characterize both the Norwegian VAT reform of 2001 and the EU VAT reform from the late 1990-ties. Will an additional extension to a uniform and general VAT system be welfare superior to the nonuniform (and nongeneral) VAT systems and what are important preconditions? As will be explained below, one cannot on purely theoretical grounds establish the welfare rankings of such VAT systems when there are preexisting distortions as tax wedges and market power in the economy. The baseline VAT system is a nonuniform VAT system mainly covering goods. This baseline VAT system is then compared with (1) the extended nonuniform Norwegian VAT reform of 2001, and (2) a general VAT system characterized by a uniform VAT rate on all goods and services, including public goods and services. The Norwegian VAT reform of 2001 was a step in the direction of a general VAT system by including many services, but there are still many exemptions, zero ratings and lower rates. In particular, the VAT rate on food and nonalcoholic beverages is half the general VAT rate. The policy reforms are made public revenue neutral, and changes in lump sum transfers as well as in the system speci,c VAT rate are studied. With a revenue-neutral change in the system-speci,c VAT rate, the VAT systems can be ranked with respect to welfare effects. Ballard et al. (1987) and Gottfried and Wiegard (1991) analyze the welfare effects of different VAT systems including tax exemptions and zero ratings in static CGE models. The separability and homogeneity assumptions in their consumer demand models favor a uniform VAT system, which is supported in their policy simulations. In contrast, our model is an intertemporal CGE model for a small open economy without strict homogeneity assumptions in consumer demand. Our model is well designed for analyzing VAT reforms because it - - 3 distinguishes between many industries, input factors and consumer goods and services. The modeling and parameters in the consumer demand system and the production technology are all the results of comprehensive micro- and macroeconometric analyses of Norwegian data. The model has a detailed description of the Norwegian system of direct and indirect taxes. Speci,cally, net VAT rates on the input factors and gross VAT rates on the consumer goods and services are included in the model. We disregard the effects on costs of administration, rent-seeking and distribution of welfare among households. The model emphasizes the small open economy characteristics by using given world market prices and interest rates. Imperfect competition is present in the domestic markets. A uniform and general VAT system is not a priori the most ef,cient in our model. When comparing the two different nonuniform VAT systems, our analysis shows that an imperfect extension of the VAT system to cover more services is welfare inferior to the baseline nonuniform VAT system only covering goods. Obtaining ef,ciency in production is empirically important for the welfare effects of the different VAT systems. An imperfect extension of the VAT system reduces ef,ciency in production because intermediates will be taxed differently for different industries. Consumer ef,ciency is also reduced due to lower VAT on inelastic goods and higher VAT on elastic services. Introducing a general and uniform VAT system is not obviously welfare superior in a distorted economy, but we ,nd that such a system improves welfare compared to the other imperfect regimes. A signi,cant empirical advantage of the general and uniform system, which is revealed by the computations, is also its ability to reduce initial wedges in deliveries to the export and domestic markets. General VAT Computation To see VAT in action, consider Exhibit 1 on p. 612, which provides a simple illustration of how VAT is implemented in the production of bread. A farmer grows and sells wheat to a miller, who grinds the wheat into flour. The miller sells the flour 2 to a baker, who makes the dough and bakes the bread. The bread is then sold to the grocer, who sells the bread to the final consumer. In each stage of bread production, value is added by the seller, and VAT is levied on that amount. To ensure that VAT is levied only on the value added by the producer, VAT uses the credit-invoice mechanism. Thus, on selling the bread to the grocer, the baker collects $30 in VAT and claims an input credit of $15, the VAT paid when the baker purchased flour from the miller. The baker ends up remitting a net VAT liability of $15 to the tax authorities. The total revenue created by VAT is the sum of VAT liability collected in each stage of bread production, in this case $50. Although - - 4 VAT is a broad-based general consumption tax (i.e., it applies to all final consumption), there are instances when the application of VAT is avoided. For example, in a pure VAT state, the tax base would theoretically include services rendered by the government, isolated sales of one's personal effects, and sales of personal services; however, no nation employs a VAT with this tax base for administrative, political, or social reasons (Schenk and Old man at 46). Thus, VAT provides exemptions or applies zero tax rating to certain transactions. "Exemption" means that the trader does not collect VAT on its sales and does not receive credits for VAT paid on its purchases of inputs. "Zero rating" means that a trader is liable for an actual rate of VAT, which happens to be zero, and receives credit for input VAT paid. Like transactions, potential taxpayers can be exempt or zero rated. An exempt trader is not part of the VAT system and is instead treated as a final purchaser. A zero-rated business does not collect VAT on sales but is compensated for any input VAT it pays. However, if the exemption occurs at the last stage of production, there is a corresponding decrease in VAT revenue because there is no shifting and increase of tax burden; the value added at the final stage simply escapes from VAT. As shown in Exhibit 3, exempting the grocer from VAT means the grocer would not collect VAT and would not be able to claim credit for the tax it paid on its purchase. The exemption at the last stage means that the grocer would become the final consumer of the bread. As a final consumer, the grocer would pay the VAT as part of the purchase price. No shifting and increase of tax burden would occur because the grocer would not be able to pass on the tax it paid from its input. An exemption occurring at the last stage of production means that the chain of input credits would cease at the stage prior to the last stage. Any value added after the baker's stage would simply escape the VAT, resulting in a decrease in government revenue due to the exemption. Overview of Retail Sales and Use Tax Before considering some of the similarities and differences between VAT and the retail sales tax (RST), this column next considers a typical retail sales tax system. The retail sales and use tax imposed by U.S. states is generally levied on all retail sales of tangible personal property that are not explicitly exempted. For services, only those explicitly enumerated are taxable (Warren, Gorham and Lamont 1998)). The tax is generally stated on the sales receipt and is collected from the consumer at the point of sale. The retailer is responsible for remitting the tax collected to the - - 5 tax authorities. In 3 theory, retail sales tax is a single-stage tax imposed on the ultimate consumer, which means that the tax should apply only to final sales for personal use and consumption. Accordingly, intermediate transactions in the economic process are excluded from the scope of the sales tax. Using the same bread production example above, sales tax would be imposed only on the final stage of production as the grocer is selling the bread to the ultimate consumer. However, under the U.S. sales tax system, the general sales tax is not confined to transfers to ultimate consumers of final products manufactured in the economic process. For example, absent an exemption, sales tax is imposed on the baker's purchases of supplies for the trucks it uses to deliver the bread to the grocer. The reason behind the taxation is that the truck supplies do not form part of the bread and the baker is considered the ultimate consumer of the supplies. However, to achieve some semblance of a balanced retail sales tax, many states' sales taxes exclude or exempt many intermediate transactions. The 1994 Tax Sharing Reform The fiscal reform of 1994 was a fairly comprehensive package of measures designed to address three areas of concern: to stem the fiscal decline and provide adequate revenues for government, especially central government; eliminate the distortionary elements of the tax structure andincrease its transparency; and revamp central-local revenue sharing arrangements. Among its key provisions was a major reform in indirect taxes that extended the value-added tax (VAT) to allturnover, eliminating the product tax and replacing the business tax in many services. It simplified the tax structure and unified treatment of taxpayers for some taxes. The centerpiece of the package was introduction of the Tax Sharing System (fenshuizhi), which fundamentally changed the way revenues are shared between the central and provincial governments. Under the Tax Sharing System (TSS), taxes were reassigned between the centraland local governments. Central taxes (or "central fixed incomes") include customs duties, the consumption tax, VAT revenues collected by customs, income taxes from central enterprises,banks and nonbank financial intermediaries; the remitted profits, income taxes, business taxes ,and urban construction and maintenance taxes of the railroad, bank headquarters and insurance companies; and resource taxes on offshore oil extraction. Local taxes (or "local fixed incomes")consist of business taxes (excluding those named above as central fixed incomes), income taxesand profit remittances of local enterprises, urban land use taxes, personal income - - 6 taxes, the fixedasset investment orientation tax, urban construction and maintenance tax, real estate taxes, vehicle utilization tax, the stamp tax, animal slaughter tax, agricultural taxes, title tax, capitalgains tax on land, state land sales revenues, resource taxes derived from land-based resources, and the securities trading tax. Only the VAT is shared, at the fixed rate of 75 percent for the central government, and 25 percent for local governments. The second important change under the 1994 reform was that to avoid the problem of poor local effort in collecting central government taxes, tax administration was also reformed, with the establishment of a national tax system (NTS) to collect central government revenues, and a local tax system to collect local taxes. This was achieved by splitting the existing tax bureaus intonational and local tax offices. The main responsibility of the NTS is the collection of VAT and consumption tax -- they collect all of both taxes and then transfer 25 percent of the VAT revenue to the local government. In most localities the split was achieved by reassigning staff according to their current functions: those in charge of turnover taxes were assigned to the NTS, and those assigned to local taxes went to the local tax bureaus. China will not overcome the regional disparities in service delivery without further revision of TSS. The 1994 reforms did too little to redistribute resources across provinces, and this situation will likely persist for a long time unless the rules are changed. To reduce horizontal disparities more quickly, the central government must be able to use an increasing share of the tax refunds for equalization in order to finance improvements in service delivery in poorer provinces. - - 7