The Revenue Productivity of India’s Subnational VAT

Skepticism exists regarding the revenue potential of a subnational value-added tax (VAT). India is one of only three countries to embrace a subnational VAT, and it did so between 2003 and 2008. We analyze the impact of this historic policy reform on revenue productivity and find that implementation...

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Bibliographic Details
Published in:National tax journal 2022-12, Vol.75 (4), p.711-729
Main Authors: Sen, Astha, Wallace, Sally
Format: Article
Language:English
Subjects:
Developed countries
Fiscal policy
Management
Methods
Political aspects
Productivity
Reforms
Sales
Sales taxes
Tax reform
Tax revenue estimating
Tax revenues
Taxation
Value-added tax
VAT
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Summary:Skepticism exists regarding the revenue potential of a subnational value-added tax (VAT). India is one of only three countries to embrace a subnational VAT, and it did so between 2003 and 2008. We analyze the impact of this historic policy reform on revenue productivity and find that implementation of the tax yields a 13 percent increase in sales tax revenue for India’s more developed states. This analysis is unique in providing empirical evidence of a revenue impact of a major tax policy reform for a subset of subnational governments in a developing country.
ISSN:0028-0283
1944-7477
DOI:10.1086/721687