Does VAT Necessarily Lead to Bigger Government Size? The Experience of States in India

IF 0.3 Q4 ECONOMICS

South Asian Journal of Macroeconomics and Public Finance Pub Date : 2018-10-04 DOI:10.1177/2277978718795752

Damodar Nepram

引用次数: 0

Abstract

Many have held that value-added tax (VAT) generates higher revenue which then leads to bigger government spending. They cited the experience of European countries claiming that both the tax rate and the government size have risen over the years. The present study finds that there are exceptions to it based on the state level data of India. The tax was introduced as a replacement for sales tax about a decade ago but an increase in government size was not observed. Instead, higher revenues generated helped in the reduction of budget deficits when introduced along with a number of austerity measures among which was the enactment of the fiscal responsibility law (FRL) placing quantitative restrictions on budget deficits. Some states did witness bigger spending but most of them were observed to be financially weaker states receiving more central transfers. It enabled them to spend more without running into deficits and, hence, meet FRL obligations. JEL Classification: H7, H26, H50

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增值税必然导致政府规模扩大吗？印度国家的经验

许多人认为，增值税会产生更高的收入，从而导致更大的政府支出。他们引用了欧洲国家的经验，声称多年来税率和政府规模都有所上升。本研究发现，根据印度的州一级数据，也有例外。该税是在大约十年前作为销售税的替代品引入的，但没有观察到政府规模的增加。相反，当引入一系列紧缩措施时，产生的更高收入有助于减少预算赤字，其中包括颁布财政责任法，对预算赤字进行数量限制。一些州确实出现了更大的支出，但据观察，其中大多数州的财政状况较差，接受了更多的中央转移支付。它使他们能够在不出现赤字的情况下增加支出，从而履行FRL义务。JEL分类：H7、H26、H50

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来源期刊

South Asian Journal of Macroeconomics and Public Finance ECONOMICS-

CiteScore

2.10

自引率

11.10%

发文量

期刊介绍： The purpose of the Journal is to publish (in English language) peer-reviewed articles, reviews and scholarly comments on issues relating to contemporary global macroeconomics and public finance by which is understood: The Journal is for all professionals concerned with contemporary Macroeconomics and Public Finance and is a forum for all views on related subjects. The Editorial Board welcomes articles of current interest on research and application on the areas mentioned above. The Journal will be international in the sense that it seeks research papers from authors with an international reputation and articles that are of interest to an international audience. In pursuit of the above, the journal shall: a. draw on and include high quality work from the international community of scholars including those in the major countries of Asia, Europe, Asia Pacific, the United States, other parts of the Americas and elsewhere with due representation for considerations of the readership. The Journal shall include work representing the major areas of interest in contemporary research on Macroeconomics and Public Finance and on a wide range of issues covering macro- economics, tax and fiscal issues, banking and finance, international trade, labour economics, computational and mathematical methods, etc. The Journal would particularly engage papers on pure and applied economic theory and econometric methods. b. avoid bias in favour of the interests of particular schools or directions of research or particular political or narrow disciplinary objectives to the exclusion of others. c. ensure that articles are written in a terminology and style which makes them intelligible, not merely within the context of a particular discipline or abstract mode, but across the domain of relevant disciplines.