Tax Policy Challenges in the 21st Century

S. 118I. Introduction

In this paper I will approach VAT neutrality with an emphasis on what ensures neutrality and the problems and solutions offered to achieve it.

In section II., the focus is on the definition, mechanism and principles for VAT characterized from a neutrality perspective and what VAT neutrality should achieve in the context of tax policy and VAT systems based on its mere definition. In section III., neutrality at a domestic level vs external neutrality in international relationships is tackled, as well as the advantages vs disadvantages of obtaining goods and services from the internal market compared to the external market and how this is to be characterized in order not to lead to a distortion of neutrality. In section IV., the focus is on the factors that could distort neutrality and possible solutions to these problems, starting with general allocation rules and ending with administrative challenges. Before concluding, a section on global trends for the achievement of neutrality has been inserted. The section on global trends is designed to spot developments made by various bodies and legislators such as the European Commission, OECD and jurisdictions at a domestic le...