Global Trends in VAT/GST and Direct Taxes

S. 612I. Introduction

VAT/GST is a consumption tax levied on the consumption of goods and services. It is characterized as an indirect tax. In recent decades VAT/GST has been turning into a ‘world tax’. All state tax revenues from consumption taxes equal the revenues from income and profits taxes – in the member countries of the ‘Organisation for Economic Co-operation and Development’ (OECD). Tax conventions are one of the tools to reduce conflicts in cross-border taxation. The world has seen a lot of tax treaties, mostly double tax conventions (DTCs). Tax treaties address many topics. The most important ones are double taxation and double non-taxation. But even though VAT/GST is at the root of many cross-border issues, none of the existing 3,000 DTCs focus on VAT/GST. This raises the question whether it may be high time for a Model Tax Convention for VAT/GST.

The OECD has started a harmonization project which by 2015 will result in ‘The International VAT/GST Guidelines’, proclaiming to ‘set forth a number of key principles for the VAT treatment of the most common types of cross-border transactions’. The first part was published in April 2014. In 2013 the OECD started a coordination projec...