VAT Coordination in Common Markets and Federations Lessons from European Experience

Abstract

The European experience shows that destination-based state VATs can be administered successfully in common markets without border controls, such as the EU, and in federations, such as the US. The existence of a (supra)national VAT would facilitate but is not a conditio sine qua non for exercising compliance control over state VATs. To control cross-border fraud, the focus should be on effective cross-border audit, which, in the US, could be performed by the IRS. These findings, strongly corroborated by Canadian experience, augur well for replacing state RSTs in the US by state VATs with or without the umbrella of an overarching federal VAT.

California here we come!

Keywords: VAT