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Wait no more: how the administration of VAT refunds impacts firm behaviour

Author

Listed:
  • Giacomo Brusco
  • Marlies Piek
  • Tejaswi Velayudhan

Abstract

Refunds are an essential feature of well-functioning VAT systems and take up a sizeable portion of government spending. In South Africa, refunds amount to 50 percent of gross VAT collection, representing a substantial transfer from the government to taxpayers that has to occur at relatively high frequency, often monthly. We show that delays in these refund payments reduce domestic investment, especially by small firms. We use administrative data to provide extensive evidence that firms respond to incentives created by delays and denials of refunds.

Suggested Citation

  • Giacomo Brusco & Marlies Piek & Tejaswi Velayudhan, 2024. "Wait no more: how the administration of VAT refunds impacts firm behaviour," WIDER Working Paper Series wp-2024-58, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2024-58
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    File URL: https://www.wider.unu.edu/sites/default/files/Publications/Working-paper/PDF/wp2024-58-wait-no-more-administration-VAT-refunds-firm-behaviour.pdf
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