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- Title
The Value-Added Tax and the Liberalization of Foreign Trade in Developing Economies: A Comment.
- Authors
McKinnon, Ronald I.
- Abstract
In this article the author comments on a research article about value-added tax (VAT), previously published in the April, 1971 issue of the Journal of Economic Literature. The paper centered on the likely economic effects of introducing a VAT, theoretical equivalences with other forms of sales and income taxation, and on applications to problems of fiscal federalism within Europe and, to a lesser extent, within the U.S. According to the author in mature economies, a VAT system is viewed primarily as a substitute for a complex of internal indirect taxes production excises, turnover taxes, consumption levies, and so on. While the introduction of a VAT system in less developed countries is important for consolidating internal indirect taxes, insofar as it replaces revenue tariffs the VAT can be an important fiscal instrument for rationalizing resource use in the flow of trade across national boundaries. Although the avoidance of accidental protection for the domestic production of consumer goods is important, a uniform VAT probably finds its greatest comparative advantage in substituting for tariffs and other levies imposed on imported raw materials and capital goods.
- Subjects
VALUE-added tax; INTERNATIONAL trade; JOURNAL of Economic Literature (Periodical); DEVELOPING countries; INCOME tax; CONSUMER goods; INDUSTRIAL equipment; PRODUCTION (Economic theory)
- Publication
Journal of Economic Literature, 1973, Vol 11, Issue 2, p520
- ISSN
0022-0515
- Publication type
Article