The implication of the value added tax in Pakistan: administration, experiences and fears

Zaman, Nadeem Uz and Ghutai, Gul and Zaidi, Syed Raza Irfan Shah (2012): The implication of the value added tax in Pakistan: administration, experiences and fears.

Abstract

Since its first imposition in France, the value added taxation has become so popular that except USA there is no other country left that does not have VAT in use. Pakistan has fulfilled its international obligation to replace its sales tax with VAT by the year 2010. This paper examines the available literature and reflects as to how successfully the country has implemented the new taxation, what has it experienced in its efforts in the replacement of sales tax and the fear relating to VAT that still remain unaddressed. It was found that the country has, as a whole, very successfully implemented the new taxation in terms of economic gains and costs to the government. Nonetheless, it is feared that the social aspects relating thereto are altogether ignored and thus this replacement is not socially optimal.

• Item Type: MPRA Paper
• Language: English
• Keywords: Value Added Tax; Pakistan; experiences; fears; economic gains and costs; social cost
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F59 - Other; G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation

References

Ahmed, S., (n.d). Implementation of VAT: Pakistan’s Experience. Central Board of Revenue Islamabad. Paper presented at the seminar on Sales Tax organized by PAF-Karachi Institute of Economics and Technology [online] available at: <http://www.pafkiet.edu.pk/LinkClick.aspx?fileticket=0q4iXgJQE4g%3D&tabid=152&mid=1553> [accessed 07 march, 2012]

Anderton, A., (2004). Economics. 3rd Edition. Causeway Press.

Bird, R. M and P–P Gendron 1998, ‘Dual VATs and cross-border trade: Two problems, one solution?’ Journal of International Tax and Public Finance 5(3): 429– 442.

Bloomberg (2008). No Value-added tax in UAE until 2010. Gulf News. Retrieved 07 Dec, 2009 from www.gulfnews.com

DCCI (2008). Value Added Tax: Policy, Organizational and Administrative Issues. www.dcci.gov.ae/content/Bulletin/.../MarketMonEn_ISSUE22.pdf

Desai, M. A., and James R. H. Jr., 2005. Value-added taxes and international trade: the evidence. Mimeo, Michigan: University of Michigan.

Emran, S. , M., and Stiglitz, J. E., 2005, On selective indirect tax reform in developing countries, Journal of Public Economics, Vol. 89, pp.599–623.

George, H., (2009); Taxes: What are they good for? Understanding Economics. Retrieved Nov 20, 2009 formhttp://www.henrygeorge.org/canons.htm

Jantscher, M. Casanegra de, 1990., Administering the VAT’ in M. Gillis, C.S. Shoup and G.P. Sicat (eds) Value Added Taxation in Developing Countries, World Bank, Washington DC.

Keen, M., 2006, VAT, Tariffs, and Withholding Taxes. mimeo, Washington: International Monetary Fund

Keen M. and Lockwood, B., 2007. The value added tax: its causes and consequences. IMF Working Paper. WP/07/183. [online] available at: <http://www.imf.org/external/pubs/ft/wp/2007/wp07183.pdf> [accessed 7 March, 2012]

Keen and Smith (2006). VAT fraud and evasion: what do we know about VAT evasion? National Tax Journal, Vol. 59, pp. 861–87.

Martinez-Vazquez, J. and A. Timofeev 2005, ‘Choosing between centralized and decentralized models of tax administration’, Andrew Young School of Policy Studies Research Paper Series, Working Paper 06–49, available at <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=901821>.

Masood. 05 June, 2010. Value added tax (VAT) Pakistan. [online] available at: <http://masoodandmasood.com/2010/06/value-added-tax-vat-vat-and-sales-tax-pakistan/> [accessed 04 March, 2012]

Mikesell, L.J. 2007, ‘Developing options for the administration of local taxes: An international review’, Public Budgeting and Finance 27(1): 41–68

Nicholson, M. W., 2010. Value added tax and US trade competitiveness. Office of Competition and Economic Analysis International Trade Administration U.S. Department of Commerce

Oates, W.E. 1999, ‘An essay on fiscal federalism’, Journal of Economic Literature 37(3): 1120–1149.

Parkins, M., (1996). Economics. 3rd Edition. Addison Wesley Publishing Company

Piggott, J., and Whalley, J., 2001, VAT base broadening, self supply, and the informal sector,” American Economic Review, Vol. 91, pp.1084–94.

Thacker, S. (July 21, 2009) Taxation in the Gulf: introduction to the Value Added Tax. Michigan State Journal of International Law, Vol. 17, Issue 3, p. 721, 2008-2009. Retrieved Nov 20, 2009 form http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1435988

Thomson, A. A. Jr. & Strickland, A. J., (2001); Strategic Management: Concept and Cases. Twelfth Edition. McGraw Hill, Irwin. 129-130

Yesegat, W. A., (2008). Value added tax administration in Ethiopia: a reflection of problems. Journal of Tax Research Vol. 6. 145-168