Tax Policy Challenges in the 21st Century

S. 140I. Introduction

The worldwide spread of VAT/GST was recognized by the OECD as the most important development in taxation over the last half century. Limited to only 10 countries in the late 1960s, VAT is currently the main source of revenue for more than 150 countries and it was recognized as the most efficient consumption tax both in terms of revenue for governments and neutrality towards international trade. The main factors that contributed to its success are: i) globalization, along with the development of technologies; ii) the neutrality of VAT with respect to international trade; iii) the efficiency of VAT in raising revenue.

Nevertheless, even though the basic principles of VAT are generally accepted, inconsistency in the application of VAT on cross-border transactions causes double taxation and unintentional non-taxation, which create obstacles to business activities, hindering economic growth and distorting competition. The OECD considered these problems significant enough to require further remedies. In this paper, the author analyses the issue of double (non-) taxation in VAT, focusing on the different remedies applied by national governments (i.e. unilateral measures), an...