James M. Bickley
Specialist in Public Finance
This report summarizes issues, arguments, and concerns relevant to a value-added tax (VAT). Long-term fiscal problems, which were exacerbated by the recession that ended in June 2009, resulted in widespread concern about the need to formulate a fiscal solution to the high budget deficits and growing national debt. The levying of a value-added tax, a broad-based consumption tax, has been discussed as one of many options to assist in resolving U.S. fiscal problems. CRS Report R41602, Should the United States Levy a Value-Added Tax for Deficit Reduction? provides a more comprehensive examination of issues, extensive footnoting of sources, and presentation of relevant data.
A VAT is imposed at all levels of production on the differences between firms’ sales and their purchases from all other firms. Arguably, the primary reason for congressional interest in a VAT is its high potential revenue yield. Other aspects of a VAT that often raise interest or concern include international comparison of composition of taxes, VAT rates in other countries, equity, neutrality, inflation, balance-of-trade, national saving, administrative costs, compliance, intergovernmental relations, and size of government.
This report considers the experiences of the 29 nations with VATs in the 30-member Organization for Economic Cooperation and Development (OECD), relevant to the feasibility and operation of a possible U.S. VAT. In order to examine different aspects of a VAT, explanations are initially provided concerning the concept of a value-added tax, the different methods of calculating VATs, exemption, and zero-rating.
The prevailing view of tax professionals is that an optimal VAT would have the following characteristics: a broad base, a single rate, the credit-invoice method of collection, the destination principle, and a significant sales threshold for registration.
Date of Report: March 22, 2011
Number of Pages: 12
Order Number: R41708
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Specialist in Public Finance
This report summarizes issues, arguments, and concerns relevant to a value-added tax (VAT). Long-term fiscal problems, which were exacerbated by the recession that ended in June 2009, resulted in widespread concern about the need to formulate a fiscal solution to the high budget deficits and growing national debt. The levying of a value-added tax, a broad-based consumption tax, has been discussed as one of many options to assist in resolving U.S. fiscal problems. CRS Report R41602, Should the United States Levy a Value-Added Tax for Deficit Reduction? provides a more comprehensive examination of issues, extensive footnoting of sources, and presentation of relevant data.
A VAT is imposed at all levels of production on the differences between firms’ sales and their purchases from all other firms. Arguably, the primary reason for congressional interest in a VAT is its high potential revenue yield. Other aspects of a VAT that often raise interest or concern include international comparison of composition of taxes, VAT rates in other countries, equity, neutrality, inflation, balance-of-trade, national saving, administrative costs, compliance, intergovernmental relations, and size of government.
This report considers the experiences of the 29 nations with VATs in the 30-member Organization for Economic Cooperation and Development (OECD), relevant to the feasibility and operation of a possible U.S. VAT. In order to examine different aspects of a VAT, explanations are initially provided concerning the concept of a value-added tax, the different methods of calculating VATs, exemption, and zero-rating.
The prevailing view of tax professionals is that an optimal VAT would have the following characteristics: a broad base, a single rate, the credit-invoice method of collection, the destination principle, and a significant sales threshold for registration.
Date of Report: March 22, 2011
Number of Pages: 12
Order Number: R41708
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
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