Front Matter

Front Matter

Alan Tait
Published Date:
June 1991
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Value-Added Tax: Administrative and Policy Issues

Edited by Alan A. Tait


Washington, D.C.

October 1991

© 1991 International Monetary Fund

Reprinted March 1995

Library of Congress Cataloging-in-Publication Data

Value-added tax: administrative and policy issues / edited by Alan A.


p. cm. — (Occasional Paper / International Monetary Fund

ISSN 0251-6365; no. 88)

“October 1991”

Includes bibliographical references.

ISBN 1-55775-184-6

1. Value-added tax—Asia. I. Tait, Alan A. II. Series: Occasional paper (International Monetary Fund); no. 88.

HJ5715.A73V35 1991




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In March 1990 the Fiscal Affairs Department of the International Monetary Fund (IMF) and the United Nations Development Program (UNDP) sponsored a joint seminar on “The Value-Added Tax in Asia,” in Jakarta, Indonesia. Particular credit should be given to the Indonesian authorities, especially Dr. Dono Iskandar, who took great trouble to ensure that the meetings were a success. The papers included in this publication reflect the discussions at the seminar. The authors are members of the staff of the Fiscal Affairs Department (Alan Tait, Milka Casanegra de Jantscher, Carlos Silvani, and Charles Vehorn) or members of the panel of fiscal experts (Graham Holland and Sol Dubroof). Although each paper acknowledges individual authors, each participant contributed to the seminar and their names appear in Appendix I.

As the first chapter of this publication shows, the value-added tax (VAT) has become a most popular tax used in over 50 countries. In the mid-1970s, the Fiscal Affairs Department of the IMF worked with the Korean authorities to assess the practicality of introducing a VAT and in 1977 Korea became the first Asian country to adopt a VAT. It was followed by Indonesia in 1985, Taiwan Province of China in 1986, and the Philippines in 1988. Beyond Asia, the Fiscal Affairs Department has worked on VATs with countries in Europe, Latin America, Africa and, most recently, in the Middle East and Eastern Europe. Probably no other agency has such a worldwide experience of hands-on problems in introducing and running a VAT.

This spread of VAT has stimulated interest internationally, including many countries in Asia, and the Jakarta IMF-UNDP conference was designed to address some of the practical questions all countries face when introducing or running a VAT. What will be the effect on prices, will it be regressive, and what are the alternatives to using a full-fledged VAT? Will it help exports and investment? How should food, capital goods, and financial institutions be treated (Chapter I)?

Introducing a VAT should be planned carefully. In Chapter II, Graham Holland, who has worked on VATs in Europe, the Middle East, and Asia, looks at the establishment and tasks of a VAT development unit, the legislation, consultation, organization, and staffing. A VAT development timetable of two years is elaborated, which can be lengthened or shortened depending on individual country circumstances.

The guidelines for administering a VAT are outlined in Chapter III. Milka Casanegra de Jantscher and Carlos Silvani, who have extensive first-hand knowledge of VATs in Europe, Latin America, and Asia, emphasize registration and taxpayer identification, invoicing and bookkeeping requirements, and the collection function, including the role of electronic data processing. Also, how should tax forms be designed and what is the appropriate role for audit in VAT?

Chapter IV considers the compliance obligations of the taxpayers; the need to establish invoices, keep books of account, and make returns. Chapter V returns to the staffing needs to run a VAT and the different possible structures.

In Chapter VI, Sol Dubroof, who has helped authorities to computerize VAT in Europe, Asia, and the Pacific, explains the role of computers in running a VAT, including an Annex outlining the basic user needs for a computer-assisted VAT administration. Chapter VII examines the crucial role of audit in VAT and gives some details of how audits for VAT might be conducted.

In all this it will be apparent that the original papers given in Jakarta have been improved by the comments made by participants; the text of each paper has been changed substantially (and Chapter IV introduced) to reflect problems and concerns raised during the seminar. At the same time, because the topics have an interest throughout the world, the specific concentration on Asia has been generalized so that the papers might now be read with profit by anyone dealing (or thinking of involving himself) with VAT. It is hoped that in this way the contributions to the seminar will be able to help politicians, tax administrators, tax advisors, and others with an interest in VAT.

Special thanks are due to the New Zealand authorities for their readiness in providing the VAT forms reproduced in the Annexes to Chapter VII. Thanks are also due to Glynis Alder, Maria E. David, Carmelita O. Eugenio, Heather D. MacDonald, Olga Martin, and Champa Nguyen for secretarial assistance and to Esha Ray of the External Relations Department for editorial assistance. The opinions expressed in the papers are those of the authors and do not necessarily reflect the views of the IMF.

The following symbols have been used throughout this paper:

  • … to indicate that data are not available;
  • — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
  • – between years or months (e.g., 1990–91 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
  • / between years (e.g., 1990/91) to indicate a crop or fiscal (financial) year.

“Billion” means a thousand million.

Minor discrepancies between constituent figures and totals are due to rounding.

The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.

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