VAT treatment of the financial services: Implications for the real economy

• Main Authors: BAYDUR, Ismail, YILMAZ, Fatih
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2021
• Subjects: VAT; Financial Services; Exempt Treatment; Laffer Curve; Heterogeneous Firms; Finance; Taxation
• Online Access: https://ink.library.smu.edu.sg/soe_research/2481; https://ink.library.smu.edu.sg/context/soe_research/article/3480/viewcontent/VAT_Financial_Institutions_sv.pdf
• Institution: Singapore Management University

Financial institutions are exempt from the value-added tax (VAT) in most countries. We develop a general equilibrium model with endogenous firm entry and a banking sector to accommodate three key distortions related to exempt treatment: (i) self-supply bias in the banking sector, (ii) under-taxation...