An Introduction to Value-added Taxation

  • Hans Fehr
  • Christoph Rosenberg
  • Wolfgang Wiegard


The debate about the use of commodity taxation as a means of protectionism is as old as the taxation of commodities itself. There were plenty of quarrels about the alleged discrimination against foreign goods and the distribution of tax revenues between different regions in medieval Europe. In 1158 a quarrel over the salt tax between bishop Otto of Freising and Henry the Lion resulted in the foundation of the city of Munich. Emperor Friedrich Barbarossa, himself, had to decide on a mutually acceptable distribution of salt-tax revenues, preventing a bloody battle at the very last minute. Elsewhere such tax quarrels were not settled so peacefully. The Alcabala, an early form of a sales tax, which was levied in Spain and its dependencies, infuriated Spain’s trading partners to such an extent that Spanish tax collectors abroad were sometimes killed. Although the battle ground has largely moved to the conference table or the courts, tax discrimination between domestic and foreign goods draws just as much attention today as it did in the Middle Ages.


Subtraction Method European Economic Community Computable General Equilibrium Model Origin Principle Destination Principle 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. 1.
    Hahn (1988) gives a very detailed description of the VAT reform debate.Google Scholar
  2. 2.
    See Sullivan (1965) for a detailed discussion of VAT legislation in France and Japan.Google Scholar
  3. 6.
    The historical development and the institutions (Council of Ministers, Commission and so on) of the European Community are described in Nicoll and Salmon (1994).Google Scholar
  4. 8.
    See Terra and Kajus (1992, pp. 9–17) for more details.Google Scholar
  5. 9.
    A brief review of the third part of the White Book can be found in van der Zanden and Terra (1987).Google Scholar
  6. 11.
    See, especially, Andel (1986) or Spahn and Kaiser (1991).Google Scholar
  7. 12.
    Similar classification schemes may be found in Shoup (1990), Tait (1988), McLure (1987) and U.S. Treasury Department (1984).Google Scholar
  8. 13.
    Optimal tax calculations for value-added taxes in Germany are presented in Kaiser, Wiegard and Zimmermann (1992); Cnossen (1982) and Tait (1988, pp. 42–44) discuss reasons for a uniform VAT rate.Google Scholar
  9. 14.
    See, for example, Sullivan (1965, p. 7), U.S. Treasury Department (1984, p. 7), McLure (1987, p. 16), and Shoup (1990, p. 8).Google Scholar
  10. 15.
    If τ I denotes the tax-inclusive and r, as before, the tax exclusive rate τI = τ/(l + τ) must hold, if tax revenues have to be the same in both cases; see Shoup (1990, p. 13) for a detailed exposition.Google Scholar
  11. 18.
    See Shoup (1990, p. 8) and Ishi (1993, p. 325).Google Scholar
  12. 20.
    Tait (1988, p. 52) gives a summary overview of exemptions and zero rates in different countries.Google Scholar
  13. 21.
    For example: Tait (1988, chapters 4 to 7), McLure (1987, chapter 8), U.S. Treasury Department (1984, chapter 6) and the papers by Due, Kay and Davis, Gillis and Conrad in a volume, edited by Gillis, Shoup and Sicat (1990).Google Scholar

Copyright information

© Springer-Verlag Berlin · Heidelberg 1995

Authors and Affiliations

  • Hans Fehr
    • 1
  • Christoph Rosenberg
    • 2
  • Wolfgang Wiegard
    • 1
  1. 1.Department of EconomicsUniversity of TübingenTübingenGermany
  2. 2.International Monetary FundUSA

Personalised recommendations