Effectiveness of the Value Added Tax Exemption Policy on Gross Domestic Product in Selected ASEAN Countries Towards a Conducive Business Environment Model

Authors

  • Atty. Prackie Jay T. Acaylar Technological Institute of the Philippines

DOI:

https://doi.org/10.31098/jgrcs.v1i2.686

Abstract

Excessive exemption is detrimental to the effectiveness of the whole Value Added Tax system. This research is primarily focused on VAT exemption affecting the business industry as it influences the Gross Domestic Product of the three (3) selected ASEAN countries, namely, the Philippines, Indonesia, and Singapore. The result of the study showed a negative relationship between VAT exemption policy and GDP growth rate among the selected ASEAN economies. Although the VAT collections among the selected ASEAN countries are significantly increasing with the course of time, the results showed that as the number of VAT exemptions increases by one unit, the degree of growth of the GDP is expected to decrease at a rate of 0.900 units. Thus, a conducive business environment may be achieved by decreasing the number of VAT exemptions and, accordingly, increasing the GDP growth rate.

References

Aizenman, J., & Jinjarak, Y., Kim, J. and Park D., “Tax Revenue Trends in Asia and Latin America: A Comparative Analysis”, NBER, Working Paper No. 21755, 2015.

Basri, M. and Rahardja, S., “Mild Crisis, Half Hearted Fiscal Stimulus: Indonesia During the GFC”, in Ito, T. and F. Parulian (eds.), “Assessment on the Impact of Stimulus, Fiscal Transparency and Fiscal Risk”, ERIA Research Project Report 2010-01, pp.169-211, ERIA, www.eria.org/publications/ research_projectreports/images/pdf/y2010/no1/ch5Basri_andRahardjaIndonesia.pdf, 2011.

Bureau of Internal Revenue (BIR) Annual Report 2008.

Chetty, V. and Pradhan, B., “Harrod-Domar Formula for Two Sector Growth Models,” Institute of Economic Growth, Boston University, 2015.

Deloitte, “Risk, uncertainty and opportunity in a changing tax landscape”, Deloitte Touche Tohmatsu Ltd., 2014.

Domar, E., “Capital expansion, rate of growth, and employment,” Econometrica, 14(2):pp. ?137–147, 1946.

Ernst and Young, “Indirect taxes in 2015”, EYG no. DL1195, www.ey.com/Publication/vwLUAssets/ey-indirect-tax-developments-in-2015/%24FILE/ey-indirect-tax-developments-in-2015.pdf, 2015.

Harrod, R., “An essay in dynamic theory,” The Economic Journal, 49 (193): pp. 14–33, 1939.

Henegadara, G., “Rostow’s Stages of Economic Growth,” University of Kelaniya, 2016.

IBFD, “International Bureau of Fiscal Documentation (website)”, https://www.ibfd.org/, 2017.

IMF, “Indonesia, selected issues”, IMF Country Report No. 17/48, International Monetary Fund, Washington, DC, https://www.imf.org/~/media/Files/Publications/CR/2017/cr1748.ashx, 2017.

Indonesia Focus, “Achieiving Fiscal Sustainability Key To Fostering Higher Economic Growth”, UOB Global Economics & Markets Research, Quarterly Global Outlook 2Q, 2018.

International Co-operative Alliance, “Paraguay will apply VAT tax on services co-operatives provide to their members”, https://ica.coop/en/media/news/paraguay-will-apply-vat-tax-services-co-operatives- provide-their-members, viewed January 27, 2017.

International Monetary Fund, “Philippines: 2004 Article IV Consultation and Post-Program Monitoring Discussions— Staff Report; Staff Statement; Statement by the Executive Director for the Philippines; and Public Information Notice on the Executive Board Discussion”, IMF Country Report No. 05/105, 2005.

Jack, W., “The efficiency of VAT implementation: a comparative study of Central and Eastern European countries in transition”, 1996.

Jurado, F., “Proposed Reforms on Value Added Tax”, NTRC Tax Research Journal, Vol. XXIX.3, 2017.

Manasan, R., “Assessment of the 2017 Tax Reform for Acceleration and Inclusion,” Philippine Institute for Development Studies, 2017.

Obias, Jr., “Estimates of the Value Added Tax Gap: 2009”, NTRC Tax Research Journal, Vol. XXII.5, 2010.

Parr, J., “On the Regional Dimensons of Rostow’s Theory of Growth,” The Applied Regional Science Conference, Blackwell Publishers Ltd., 2001.

The World Bank, “Paraguay Overview", http://www.worldbank.org/en/country/ Paraguay/overview, and The International Monetary Fund (IMF), "Paraguay: 2016 Article IV Consultation – Press Release and Staff Report", 2017.

Thirlwall, A., “The Nature of Economic Growth: An Alternative Framework for Understanding the Performance of Nations,” E. Elgar, 2002.

UNESCAP, “Economic and Social Survey of Asia and the Pacific 2014”, Regional Connectivity for Shared Prosperity, United Nations, https://www.unescap.org/sites/default/files/Economic%20and %20Social%20Survey%20of%20Asia%20and%20the%20Pacific%202014.pdf, 2014.

United States Department of Agriculture (USDA), “Understanding Cooperatives: Income Tax Treatment of Cooperatives”, Cooperative Information Report 45, Section 8, http://www.uwcc.wisc.edu/pdf/CIR45-8.pdf, viewed January 27, 2017.

World Bank, “East Asia Pacific Economic Update, October 2015: Staying the Course”, Washington, D.C.: World Bank, 2015.

World Bank, “Community Driven Development and Social Capital: Designing a Baseline Survey in the Philippines”, World Bank Report No. 32405-PH, May 2005.

Downloads

Published

2021-10-31

How to Cite

Acaylar, A. P. J. T. . (2021). Effectiveness of the Value Added Tax Exemption Policy on Gross Domestic Product in Selected ASEAN Countries Towards a Conducive Business Environment Model. Journal of Governance Risk Management Compliance and Sustainability, 1(2), 01–17. https://doi.org/10.31098/jgrcs.v1i2.686

Issue

Section

Articles