Taxable Base of the Value-Added Tax (CRS Report for Congress)
| Release Date |
Revised Oct. 6, 2009 |
| Report Number |
RS22720 |
| Report Type |
Report |
| Authors |
Maxim Shvedov, Analyst in Public Finance |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
The key determinant of the VAT's revenue-raising potential is the size of its taxable base. Thisreport estimates its size under two frequently used "generic" policy options: a broad-based VATand a VAT with certain frequently mentioned exemptions. Under the assumption of the broadbasedVAT, the potential revenue base could be equal to $8.8 trillion in 2008. Exempting certainexpenditures, such as food, housing, healthcare, and others is estimated to reduce the taxable baseto $5.1 trillion in 2008.These estimates are likely to overstate the size of the taxable base under either scenario as theyassume no behavioral responses and perfect compliance with the law. This report brieflydiscusses these and other important caveats and their implications for revenue projections andfurther policy analysis.This report will not be updated.
