The Regressivity of a Value Added Tax: Tax Credit Method and Subtraction Method — A Japanese Case

Tamaoka, Masayuki

doi:10.1111/j.1475-5890.1994.tb00197.x

Cited by 13 publications

(6 citation statements)

References 2 publications

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“…Countries that maintain a progressive tax system usually take measures to exempt food, social necessities and social transfer programmes (cash or in-kind), taxing necessities at low rates and luxuries at high rates to mitigate the regressivity of VAT (Tamaoka, 1994; see also Kundu and Cabrera 2022). Thomas (2020) finds VAT to be roughly proportional or somewhat progressive in nature in most of 27 OECD member countries.…”

Section: Robust Social Protection Systems Can Mitigate the Regressive...mentioning

confidence: 99%

The Value-Added Tax (VAT) Improvement Program: Raising the operational efficacy of the VAT administration in Bangladesh

Bari¹,

Khan²,

Ullah³

2022

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Bangladesh has a weak and inequitable tax system. Over the past 15 years, the government of Bangladesh (GoB) has relied on the regressive value-added tax (VAT) for more than a third of all revenues, with little progress towards strengthening direct taxation of high net-worth individuals and large corporations. From 2015–2021, the World Bank’s VAT Improvement Program (VIP) assisted the Bangladesh National Board of Revenue in improving VAT administration. VIP helped speed up automation and increase revenues. But the program did not include any objectives to improve VAT equity and fairness, and it also fell short on improving transparency and taxpayer satisfaction. To address VAT’s regressive nature and its impact on low income households, the GoB needs to improve coverage of social protection programmes. Bangladesh and its external partners should focus on strengthening progressive direct taxation. Meanwhile, the government must end gender-blind VAT administration and recognize that VAT negatively affects low income female entrepreneurs and consumers.

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Section: Robust Social Protection Systems Can Mitigate the Regressive...mentioning

confidence: 99%

The Value-Added Tax (VAT) Improvement Program: Raising the operational efficacy of the VAT administration in Bangladesh

Bari¹,

Khan²,

Ullah³

2022

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“…(WDR2020: 202) Rather than recommending progressive taxation on capital/profits to fund these protections, WDR2019 instead argues that value-added taxes should be prioritized for raising the necessary domestic public revenues (WDR2019: 132). Such taxes are widely understood to be regressive because they penalize the poor, who spend a higher proportion of their income of consumption (Tamaoka, 1994).…”

Section: The Shift Of Income From Labour To Capital: Recognition But ...mentioning

confidence: 99%

Oligopoly-driven development: The World Bank’s Trading for Development in the Age of Global Value Chains in perspective

Selwyn

Leyden

2021

Competition & Change

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The World Development Report 2020 (WDR2020) asserts that global value chains raise productivity and incomes, create better jobs and reduce poverty, and proposes state policies to facilitate global value chain-based development. We deploy an immanent critique of WDR2020 to interrogate its claims regarding wages and working conditions. Using the Report’s own evidence, we identify contradictions in its claims, which stem from its use of comparative advantage trade theory to reconceptualize global value chain relations. This perspective predicts mutual gains between trading partners, but its core assumptions are incompatible with the realities of global value chains, in which (mostly Northern) oligopolistic lead firms capture value from (mostly Southern) suppliers and workers. We show how WDR2020 conceals these contradictions by misconstruing, inverting and ignoring evidence (particularly of labour’s agency), whilst failing to recommend redistributive measures for the unequal outcomes that it recognizes. By redeploying heterodox conceptions of monopoly capital and by using a class-relational approach, we scrutinize WDR2020's overly positive portrayal of lead firms. We provide alternative theoretical foundations to better explain the evidence within the Report, which shows that global value chains concentrate wealth, exacerbate inequalities and constrain social upgrading – with negative consequences for supplier firm workers in developing countries.

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“…There are several other studies dealing with the regressivity of the VAT burden. Using IO analysis to generate a simulation, Tamaoka (1994) analyzes, the effects of changes in VAT rates in Japan and the shift from the existing single-rate system with the smallest range of exemptions to a multi-rate system including exemptions for selected necessities. He finds that Japan's VAT is regressive with respect to income as well as consumption and also that VAT exemptions on necessities do not eliminate the regressivity of VAT but only reduce VAT burdens for all income groups in Japan.…”

Section: Literature Surveymentioning

confidence: 99%

Comparison of Fiscal and Distributional Effects of VAT Exemptions in Korea and Japan

Sung¹

2018

KJPS

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This paper estimates and compares fiscal and distributional effects of Korean and Japanese VAT exemptions. VAT exemptions have two types of fiscal effects on revenue: they lead to reductions in VAT revenue via the output tax and revenue increases via the undeducted input tax through cascading effects. The results of input-output analyses for both countries indicate that the former effect outweighs the latter, reducing VAT revenue but that the exemptions mitigate the distributional regressivity of its incidence. In Korea in particular, the expansion of an aged population means there are more individuals affected by VAT regressivity, as most members of this population belong to low-income deciles, mainly because they are retirees. As is suggested by the life-cycle hypothesis, older populations are likely to have higher propensity to consume than younger ones. In Japan, the VAT was supposed to increase from 8% to 10% in October 2016, having already increased from 5% to 8% in April 2014. The additional increase was expected to exacerbate the negative impact of the VAT on income redistribution. For this reason, it has been repeatedly postponed, and now is not expected to take effect until October 2019. The growing socioeconomic resistance of the Japanese people to the VAT increase may require additional VAT reforms in Japan. It might, for example, need to increase tax revenue to cope with its growing national debt to GDP ratio as well as with its increasing welfare expenditure. The VAT is one of its key potential revenue sources. In addition, it might also need to broaden the scope of VAT exemptions to include more necessities at the expense of a little revenue so as to ease the potential increase in VAT regressivity expected to ensue from the October 2019 rate increase.

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The Regressivity of a Value Added Tax: Tax Credit Method and Subtraction Method — A Japanese Case

Cited by 13 publications

References 2 publications

The Value-Added Tax (VAT) Improvement Program: Raising the operational efficacy of the VAT administration in Bangladesh

The Value-Added Tax (VAT) Improvement Program: Raising the operational efficacy of the VAT administration in Bangladesh

Oligopoly-driven development: The World Bank’s Trading for Development in the Age of Global Value Chains in perspective

Comparison of Fiscal and Distributional Effects of VAT Exemptions in Korea and Japan

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