Study Reports On Worldwide VAT Changes

by Glen Shapiro, LawAndTax-News.com, New York

06 May 2004

Tax calculation software and compliance solutions provider, Taxware LP on Tuesday announced the publication of a summary of the major changes to VAT systems introduced on a worldwide basis in 2003.

Speaking regarding the results of the study, Taxware's vice president of Tax and Government Affairs, Jon Abolins observed that:

"Value Added Taxes around the world are growing in both complexity and scope. Of the 102 countries currently supported by Taxware systems during 2003, two countries introduced VAT for the first time; nine increased or decreased their VAT rate or rates and six introduced varying levels of VAT reforms."

According to the Taxware figures, in 2003, VAT system reform gained momentum in China, Czech Republic, Hong Kong, Hungary and Slovakia, often resulting in increased tax rates. For example, in China, the State Administration of Taxation introduced new VAT export refund rates, effective January 1, 2004, of 17 percent, 13 percent, 11 percent, eight percent, five percent and zero percent for different custom categories.

In addition, in the Czech Republic, services currently charged at five percent VAT will now charge a 22 percent rate, and in Hungary, the zero rate was replaced by a five percent levy.

The firm also suggested that the need to increase national revenue by increasing VAT appears to have been the primary motive behind changes in Jamaica, Malta and Sri Lanka. Smaller changes also took place in Argentina, Chile, Peru and Singapore, sometimes as part of a wider economic strategy to improve the local economy. In Kenya and Russia, the VAT rate was reduced to attract inward investment.

“The need for revenue to fund government activities lies behind many of the changes,” explained Abolins, going on to add that:

“Such a volume of change on an annual basis creates considerable administrative overhead for the corporate tax departments of companies trading internationally."

He concluded:

"While VAT may be a popular tax with government, it remains one of the most expensive for companies to administer. Estimates of this vary from five percent of the trade value to 20 percent of the tax paid."

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