CLE::VAT
Section
- 1		 Section
- 2		 Section
- 3		 Section
- 4		 Section
- 5		 Section
- 6		 Section
- 7		 Section
- 8		 Section
- 9		 Annexure

THE GLOBAL PERSPECTIVE

VAT as a method of taxation has been adopted by as many as 130 countries all over the world. Therefore, it is no wonder that more countries want to join the bandwagon, and implement either a full-fledged VAT system or a concoction of it. Experience has shown VAT in a federal set up can be much difficult to design and implement, compared to a Unitary set up, for a number of reasons, such as:

  1. Assigning the responsibility of implementing- Federal government or the State Governments.

  2. Harmonisation of tax rates by all the States means that States would lose fiscal autonomy in fixing tax rates (according to the ground realities such as extent of industrialisation, development, State's financial position etc.) and be influenced by the need to ensure uniformity with other States in tax rates and policies.

  3. The VAT system does not ensure Revenue Neutrality for any state (atleast in the initial years) with the result that States look for additional sources of revenue outside the VAT system to compensate for the loss of revenue. This gives place to the existence of VAT-able and Non-VAT-able duties or taxes at the same time. 


    Perhaps, this has deterred even countries such as the United States of America and Australia from implementing a VAT 1 . On the other hand, countries with Unitary Governments have been successful in raising resources through VAT.

    Other countries, which operate under a VAT regime, include France (introduced initially in 1954, and later broad-based in 1968), Denmark in 1967, and Germany in 1968 soon followed by other members of the European Community. Developing countries like Brazil and Uruguay also pioneered the VAT as early as in 1968. Among the 24 OECD countries, 21 have implemented VAT, with the exception of the US, Switzerland and Australia.

    However it may be borne in mind that the VAT implemented in all countries may not be exactly identical, and are usually designed to meet their specific purposes, addressing their specific concerns. For instance, while in some countries VAT covered both Goods as well as Services, in others, VAT was only on Goods. Further, some countries have implemented VAT right upto the retail stage, while others have applied it only up to the Wholesalers' stage. Thus considerable variation in the extent of application and implementation of the VAT exists even today.

...............Back