VAT Neutrality

Most major economies use a value added tax (VAT) which is a derivation of the
French 1954 taxe sur la valeur ajoutee. The initial imposition of VAT in
France and its spread around the world have been driven by economic reasons.
This book focuses on one of these economic triggers: the neutrality of VAT as
regards the functioning of the economy. It demonstrates that the reason VAT
was chosen in France and why thereafter it spread around the world was because
it offered the possibility to collect governmental revenue while allowing the
economic forces of the market to interplay without being adversely affected.
The prerequisite conditions for the existence of VAT neutrality are therefore
identified herein along with an overview of the VAT mechanism, demonstrating
that the concept of neutrality is built into the VAT system in a manner that
allows for the preservation of the natural functioning of the market. After
the definition of VAT neutrality is set forth, the elements that comprise VAT
neutrality are tested against the realities on the ground and the issues that
infringe the neutrality of VAT are identified and analysed. In conclusion,
remedies for these issues are being sought by a review of the causes of
infringement of VAT neutrality in the perspective of selected proposals for
modified VAT systems. These proposals include redesignating the place where
VAT is levied and improving VAT collection. Ultimately, the proposed solution
has recourse to the roots of VAT together with the most advanced technological
tools available to give back to VAT the power to levy revenue while letting
the economic forces of the market interplay without instigating any adverse
influence.