THE IMPACT OF VAT EXEMPTIONS ON REVENUE COLLECTION

Abstract

Value Added Tax (VAT) is a significant source of revenue for governments worldwide. However, the implementation of VAT exemptions can profoundly impact revenue collection, leading to both intended and unintended consequences. This study investigates the effects of VAT exemptions on government revenue, examining various sectors and their respective tax behaviors. By analyzing empirical data from multiple jurisdictions, the research highlights how exemptions can distort market dynamics, influence consumer behavior, and ultimately alter fiscal outcomes. The findings indicate that while VAT exemptions may aim to alleviate burdens on specific industries or consumer groups, they can also lead to significant revenue losses and increased administrative complexities.