The Long Arm of the European VAT, Exemplified by the Dutch Experience

23 Pages Posted: 25 Apr 2014

See all articles by Leon Bettendorf

Leon Bettendorf

CPB Netherlands Bureau of Economic Policy Analysis

Sijbren Cnossen

CPB Netherlands Bureau of Economic Policy Analysis

Date Written: March 24, 2014

Abstract

The European Commission is evaluating the performance of the common VAT, which has many shortcomings. The numerous exemptions and differentiated rate structures violate the logic and functionality of the VAT. The exemptions distort input choices and outsourcing policies. Reduced rates are ill-targeted tools for mitigating the regressivity of the VAT. In view of these design shortcomings, the EU VAT is in danger of becoming an anachronism compared with modern VATs elsewhere. This paper illustrates its shortcomings with reference to the Dutch experience. The paper does not break new ground, but provides a disconcerting picture of the excess burden of a major revenue source. Bold reform is indicated.

Keywords: VAT, European Union, exemptions, reduced rates

JEL Classification: H210, H230, H250

Suggested Citation

Bettendorf, Leon and Cnossen, Sijbren, The Long Arm of the European VAT, Exemplified by the Dutch Experience (March 24, 2014). CESifo Working Paper Series No. 4730, Available at SSRN: https://ssrn.com/abstract=2428643 or http://dx.doi.org/10.2139/ssrn.2428643

Leon Bettendorf

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Sijbren Cnossen (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

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