This paper contains a proposal (referred to as the qmodified reverse-chargingq approach) to tax financial intermediation services under a VAT. At the heart of the proposal is the application of a reverse charge that shifts the collection of the VAT on deposit interest from depositors to banks, in conjunction with the establishment of a franking mechanism managed by banks that effectively transfers the VAT so collected to borrowers as credits against the VAT on their loan interest on a transaction-by-transaction basis. The proposal is fully compatible with an invoice-credit VAT and is capable of delivering the correct theoretical result at minimal administrative costs.The first is administrative: as noted earlier, the bulk of bank deposits is derived from multitudes of individual final ... for collecting the tax is shifted, through the reverse charge, from the foreign suppliers to the resident service importers.16 Whenanbsp;...
|Title||:||A New Approach to Taxing Financial Intermediation Services Under a Value Added Tax|
|Author||:||Howell H. Zee|
|Publisher||:||International Monetary Fund - 2004-07-01|