Volume 20 (2011)

Volume 20 (2011) / Issue 2

Howell H. Zee, 'A VAT Voucher System for Origin-Based Taxation' (2011) 20 EC Tax Review, Issue 2, pp. 75–83


A major challenge in value-added tax (VAT) design concerns the discovery of an approach to ensure that, in a decentralized system of VATs being administered by individual jurisdictions within a federation or an economic union, VAT revenue collection would be distributed among the jurisdictions on the destination basis even in the absence of internal fiscal borders. This paper contains a new proposal, in the form of a specially designed voucher system coupled with the coordinated use of reverse charges, to overcome the above challenge in an incentive-compatible and cost-effective manner and argues that it has significant advantages over all other currently known proposals or practices. The policy implications of this proposal are considerable not only for those authorities (such as the European Union) that are currently engaged in an ongoing search for a satisfactory solution to this long-standing VAT challenge but also for other authorities (such as the United States) that may well face the same challenge in the future.

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ISSN: 0928-2750
ID: ECTA2011008