Global Trends in VAT/GST and Direct Taxes

S. 2I. Introduction: an international perspective on VAT/GST

In the modern era of globalization, local and international consumption of goods and services has reached unprecedented peaks. Consequently, indirect taxation on consumption has become a significant and increasingly relevant source of revenue. Local governments and supranational institutions have thus become more and more involved in indirect tax policy.

According to official data recently published by the Organisation for Economic Cooperation and Development, VAT has been implemented in more than 150 countries around the world. Thirty-three of the thirty-four OECD member countries have a VAT or GST system. The exception is the United States. Moreover, in the OECD countries, VAT represents 6.6 % of GDP and 19.5 % of total taxation. The trend, also, indicates a steady increase since 1965, the starting year of the sample considered by the OECD.

VAT was introduced in the EU by the First and the Second Directives, in order to replace national turnover taxes. Following the policy-making role of the European Economic Community in the second half of the last century, other supranational institutions have been involved in the VAT/GST im...