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Proposed changes to the value added tax: implications for tax revenue and price distortions

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  • Stephen Marks

Abstract

This paper examines changes to the value added tax (VAT) system proposed recently by the Indonesian Ministry of Finance-in particular that the exemptions for certain sectors be ended. Using the input-output relationships in the economy as a basis, it analyses the implications of these changes for tax revenue and for price distortions. It also considers other feasible changes to the VAT exemptions that could be advantageous. The paper concludes that the estimated revenue impacts of the proposed changes are small relative to the apparent scope for revenue increases from improved administration of the system as it stands.

Suggested Citation

  • Stephen Marks, 2005. "Proposed changes to the value added tax: implications for tax revenue and price distortions," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(1), pages 81-95.
    • Handle: RePEc:taf:bindes:v:41:y:2005:i:1:p:81-95
    DOI: 10.1080/00074910500072716
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    References listed on IDEAS

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    1. Gottfried, Peter & Wiegard, Wolfgang, 1991. "Exemption versus zero rating : A hidden problem of VAT," Journal of Public Economics, Elsevier, vol. 46(3), pages 307-328, December.
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    Cited by:

    1. Giesecke, James A. & Nhi, Tran Hoang, 2010. "Modelling value-added tax in the presence of multi-production and differentiated exemptions," Journal of Asian Economics, Elsevier, vol. 21(2), pages 156-173, April.
    2. Mr. John D Brondolo & Frank Bosch & Mr. Eric Le Borgne & Mr. Carlos Silvani, 2008. "Tax Administration Reform and Fiscal Adjustment: The Case of Indonesia (2001-07)," IMF Working Papers 2008/129, International Monetary Fund.
    3. James A. Giesecke & Nhi H. Tran, 2018. "The National and Regional Consequences of Australia's Goods and Services Tax," The Economic Record, The Economic Society of Australia, vol. 94(306), pages 255-275, September.

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