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Price P1 in Figure Nº 6, performs the roll of price P0 of Figure Nº 4. VAT levying internal purchases is supported by the domestic demand, but due to the increase of Tax on Exports o the quota on exports, the tax burden is shifted to the Agricultural Sector, compensating the incidence of VAT. Exports are reduced to Q5Q6 = JI. Final price to producers has been reduced to P3; sector production falls once again – due to this new negative incentive - from Q2 to Q6.

Conclusion that can be arrived from this analysis is: since the tax revenue obtain by Tax on Exports do not take into account the total cost produced by the price reduction, to account the VAT revenue in the tax burden corrects that under-estimation of tax incidence. In the example, 10% of tax rate in VAT compensates the amount not taken into account of the effects of the 10% corresponding to Tax on Export. But actually both tax burden should be accounted while calculating the STB.

The numerical example can be observed in table of Case 7. The example assumes equal tax rates (10%) for VAT and Tax on Exports. Since final price to consumers with VAT included was 260 in Case 3, it is reduced to 90% as a consequence of Tax on Exports (rate 10%). From that new price should be estimated the impact of VAT along (upstream) the chain. Values added in each stage are reduced in 10%. In the example once again is assumed backward shifting of the tax on exports` burden, so the value added of the input supplier of Stage I is also proportionally reduced. Exports are supposed to represent 30% of total production.

Summing up results: “total impact” or “total statutory burden” on added value of the Agricultural Sector identified as “Extended estimation” (TB1) is equal to the sum of the net VAT tax burden (6%), plus “tax on production” (14%) due to Tax on Exports (total 20%). The “Restricted estimation 1” (TB3) does not compute VAT and maintains the imputation of the “tax on production” (14%). The “Restricted estimation 2” (TB4) computes VAT and Tax on Exports (6% + 4% = 10%). Finally, the “Usual estimation” (TB2) considers 0% for VAT – due to liabilities-fiscal credits compensation - and only takes into account Tax on Exports [(259x0,30x0,10)/180 = 4%]. Consequently, in comparison with the “Extended estimation” (TB1), the “Usual estimation” (TB2) implies an underestimation of 80%; the “Restricted estimation 1” (TB3) 30%; and, the “Restricted estimation 2” (TB4) 50%. The application of a “strict statutory burden approach” corresponds to TB1 that computes all tax payments – explicit or implicit – made by the sector, including: VAT (“net liability-fiscal credit balances” of each stage and “technical negative balances” or VAT net fiscal credits not rebated to taxpayers) and the impact (omitted in public accounting) of the tax on production caused by the Tax on Exports (that finances the subsidy to domestic demand).

Finally, in a more realistic economic model in which interindustrial relationships between firms belonging to the own sector were taken into account (transactions between firms belonging to the same Agricultural Sector)28, the tax on production effect of tax on exports should be reduced in proportion to that self-input-production29. Only the production directed to final demand (consumers or households) and intermediate demand belonging to others sectors should be computed. The effect of that portion of self-input-production

28 29 For example, if activity “Meat” requires inputs of activity “Corn” for cattle feeding. A computable general equilibrium model applied to the estimation of the agro-industrial chain’s tax contribution in Argentina, where these relationships are taken into account, can be found in Porto, Piffano and Di Gresia (2007).

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