The rise of VAT and the impact of digitalisation

The rise of value-added tax (VAT) in the last decades is stunning.

Source: OECD (2018), Revenue Statistics 1965 – 2017, p. 29

I ask myself what the long-term impact of digitalisation will be. My guess would be that it becomes even more important and its share of total tax revenue further increases. On the one hand, VAT can easily be extended to the sale of digital products and services. On the other hand, I observe that tax administrations unroll digital technology first and massively in the area of VAT (it’s less complicated than corporate tax, for example). This makes control cheap and efficient, especially in the area of digital services, and will help a lot improving taxpayer compliance and increasing revenue.


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