Vat In Global Environment Conference

By: EconomyWatch   Date: 30 June 2010

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On March 15-16 in Rome, Italy the International Tax Dialogue - a joint initiative of IMF, the OECD, THE World Bank with the UN as an active observer convened the first global tax conference to examine the experience of countries adopting value added tax (VAT).


The summit simply stated that VAT is a general consumption tax assessed on value added on goods and services as they pass through supply chain. The conference was opened by Italian minister of Economy and Finance, Domenico Siniscalo and drew participants from more than 85 countries as well as representatives from International and regional tax organizations.

The discussion examined policy and administrative challenges of using VAT system. The discussion included tax treatment in financial services, operation of VAT in small island economies, application of VAT to the public sector and electronic commerce as well as compliance and audit issues and growing incidence of tax evasion.

Italian minister of economy and Finance, Mr. Domenico Siniscalo emphasized the opportunity to analyze the pros and cons of VAT, a tax that is now largely applied at global level and a considerable source of tax yield. He noted the coverage of taxable base, which is necessary to ensure effectiveness and neutrality of tax. The risks in applying different taxes rates are market distortions and increase in both administrative and compliance costs, which would be borne by administration and traders. He added increasing tax fraud and evasion and measures for checking them.

Mr. Danny Leipziger, vice president of world bank's poverty reduction and Economic management Network, stressed that "In just 50 years, value added tax have become a major source of revenue in many countries. VAT constitutes a larger portion of revenues both in developed as well as developing nations. Tax performance directly hits the ability to meet the millennium targets. It is there fore a key policy area for all concerned with revenue mobilization".
Mrs. Teresa Ter Minassian, Director of International Monetary Fund's Fiscal Affairs Department stressed the importance of VAT for emerging market and Developing countries." VAT has proved itself a powerful tool in modernizing and strengthening domestic systems, enabling these countries to better meet the challenges of financing poverty reduction and further trade liberalization. Bringing together for the first time the world's leading experts and practitioners in the art of VAT, this conference is a unique opportunity for sharing experience on this key aspect of the world's tax system"

Mr. Donald Johnston, the secretary general of the OECD chaired the high level opening panel. He commented that the spread of new information technologies and closer global economic integration significantly increases the risks of double taxation (or double non-taxation) arising from interaction of different VAT systems around the world. He added," Perhaps the time has come to have model VAT convention, just as we have model income tax convention". He noted that VAT systems in many OECD countries are being systematically attacked by tax fraudsters, hence we need better international cooperation to tackle such behavior.

EU commissioner Laszlo Kovacs noting the European commissions satisfaction at being able to support this international event, stressed that "the commission will continue to pursue its objectives for VAT reform which include the simplification and modernization of the EU's VAT system. The system must not create obstacles for business and within the EU the process of tax reform must take full account of the policy objectives of the Lisbon agenda. The economic environment within which the tax systems operate has changed immeasurably in recent years and failure to recognize this will leave business with undue compliance burdens. Inefficiency within the system also adds to the operating costs of administrations and is a distraction from the need to combat systematic tax fraud.Cooperation between tax administrations is an important component in tackling this common concern".


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