European Parliament Library

The Anatomy of the VAT, Michael Keen

This paper sets out some tools for understanding the performance of the value added tax (VAT). Applying a decomposition of VAT revenues (as a share of GDP) to the universe of VATs over the last twenty years, it emerges that developments have been driven much less by changes in standard rates than by changes in ‘C-efficiency’ (an indicator of the departure of the VAT from a perfectly enforced tax levied at a uniform rate on all consumption). Decomposing C-efficiency into a ‘policy gap’ (in turn divided into effects of rate differentiation and exemption) and a ‘compliance’ gap (reflecting imperfect implementation), results pieced together for EU members suggest that the former are in almost all cases far larger than the latter, with rate differentiation and exemptions playing roles that differ quite widely across countries
Table Of Contents
Cover; Contents; I. Introduction; II. Understanding trends in VAT revenue; A. Trends in VAT Revenues and Rates; Figures; 1. Average VAT Revenue by Income Group; 2. Average VAT Revenue by Region; 3. Average Standard Rate of VAT by Income Group; B. Decomposing VAT Revenue; 4. Average Standard Rate of VAT by Region; III. Understanding C-efficiency; 5. Decomposing Changes in VAT Revenue, 1993-95, by Income Group; 6. C-efficiency by Income Group; 7. C-efficiency by Region; A. Concept and Measurement; B. 'VAT Gaps' and the Decomposition of C-efficiency; Table 1. Decomposing C-efficiency
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (29 p.)
Specific Material Designation
Form Of Item

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