Subnational Taxing Options: Which is Preferred, a Retail Sales Tax or a Vat?
Posted: 4 Mar 2003
The authors ponder whether a retail sales tax or a value added tax is a better option for subnational governments. A national VAT in the United States could coexist with the existing retail sales tax in the states, the authors write.
If compliance is the main concern, governments might prefer to have VATs at both the subnational and national levels. However, if fiscal autonomy of the subnational governments and taxing transactions on the destination principle are most important, governments may prefer to combine a national VAT with subnational retail sales taxes, the authors say.
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