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of domestic goods, the correct method should be the “Extended estimation” alternative (TB1).

In case of tradable goods adopting the “economic incidence approach” of VAT – which implies null imputation of this tax to sector tax burden under the questionable assumption of forwarding tax shifting – a basic principle of coherence would suggest not to omit computing the Tax on Exports incidence (using the “Restricted estimation 1), so taking into account the “tax on production” implicit in the effect of Tax on Exports, and destined not only to generate revenues to the government but particularly to finance the subsidy to domestic demand31.

The “Restricted estimation 2” pretends to be a “commitment-agreement methodology”, as long as it could be assimilated to a percussion approach that hides or neglects the lack of registration of the tax on production and the subsidy to the domestic demand caused by the tax on exports while imputing VAT revenue.

Finally, if the “Usual estimation” or the “Restricted estimation 1" were adopted, for an elementary reason of consistency, it should not be imputed to the sector the total VAT revenue, that is, excluding also VAT levying domestic goods. ________________________________________________________________________

Appendix “On Sector Tax Burden Measurement and the Concept of Tax Expenditure: Something Important is Missing” (*)


The traditional concept or the old version of Public Finance formulated a definitive and clear cut differentiation among three dimensions of any government budget:

a) Expenditures, essentially referred to services categorized as "public goods" and/or "mixed goods" (general administration, defense, security, justice, general education, public health) representing the purchase of goods and services dedicated to compliment such functions; b) Taxation, as the genuine source of public expenditure financing; c) Public Debt or the Use of Public Credit, as an extraordinary resource to finance capital expenditure and very exceptionally to cover government's operative deficits. 32

In federal governments, it was assumed the existence of “autonomous sub-national level of governments”, governing their own fiscal equation (expenditure and resources) with independence of others government levels, seeking for their financial sustainability in the long term. Very exceptionally, sub-national levels of governments could obtain contributions from the central or national government, to overcome financial shocks or

  • *

    From Piffano (2004a).

31 Actually, the usual justification for levying taxes on exports or quotas to exports has not been the “fiscal aim”, but to regulate internal or domestic commodities’ prices.

32 The possibility of deficits under recession periods of the economic cycle was popularized by the Keynesian vision on the roll of public finance (Musgrave, 1959). Further contribution, like the “ricardian equivalence principle” suggested that deficits mean future taxes, and that public debt do not affect consumer behavior in the long term.

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