The role of country governance on value-added tax and inequality

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dc.contributor.authorChan, Sok-Gee
dc.contributor.authorRamly, Zulkufly
dc.contributor.otherEkonomická fakultacs
dc.date.accessioned2018-12-06
dc.date.accessioned2018-12-17T08:38:50Z
dc.date.available2018-12-17T08:38:50Z
dc.description.abstractIncome inequality is a growing concern for regulators because it brings adverse consequences towards social stability, institutional stability and economic performance. One of the popular ways to reduce income inequality is through the implementation of Value Added Tax (VAT) despite of many criticisms on its regressive nature. Hence, using a wide data range from 1984 to 2014, we study the impact of VAT on income inequality in both developed and developing countries. Besides, this is the first study that seeks to focus on the moderating role of country governance in enhancing the effect of VAT on income inequality. We use the Generalized Method of Moments (GMM) to overcome the endogeneity, autocorrelation and heteroscedasticity issues. The results suggest that the VAT reduces income inequality but the positive effect is contingent upon the existence of a set of good country governance. Countries that have higher quality of bureaucracy, greater democratic accountability, high government stability, effective law and order, low political risk and favourable socioeconomic conditions stand to benefit more from the VAT system in terms of narrowing the income inequality. Therefore, we conclude that better institutions improve the tax collection and public service delivery, which is a crucial element in achieving the economic objective of narrowing the income gap between the wealthy and the poor. This is particularly true in developing countries. Further, the governments in developing countries need to effectively manage the degree of socioeconomic pressure that could distract them from implementing social and economic policies to eradicate poverty and raise the income level of the poor segment of society.en
dc.formattext
dc.format.extent15 strancs
dc.identifier.doi10.15240/tul/001/2018-4-006
dc.identifier.eissn2336-5604
dc.identifier.issn1212-3609
dc.identifier.orcid0000-0003-0244-4900 Chan, Sok-Gee
dc.identifier.orcid0000-0002-5409-5960 Ramly, Zulkufly
dc.identifier.urihttps://dspace.tul.cz/handle/15240/124747
dc.language.isoen
dc.publisherTechnická Univerzita v Libercics
dc.publisherTechnical university of Liberec, Czech Republicen
dc.publisher.abbreviationTUL
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dc.relation.ispartofEconomics and Managementen
dc.relation.isrefereedtrue
dc.rightsCC BY-NC
dc.subjectincome inequalityen
dc.subjectvalue added taxen
dc.subjecttax distributionen
dc.subjectcountry governanceen
dc.subjectGeneralized Method of Moments (GMM)en
dc.subject.classificationC23
dc.subject.classificationE62
dc.subject.classificationH21
dc.subject.classificationH2
dc.subject.classificationO43
dc.titleThe role of country governance on value-added tax and inequalityen
dc.typeArticleen
local.accessopen
local.citation.epage93
local.citation.spage79
local.facultyFaculty of Economics
local.filenameEM_4_2018_06
local.fulltextyes
local.relation.abbreviationE+Mcs
local.relation.abbreviationE&Men
local.relation.issue4
local.relation.volume21
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