Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283717 
Year of Publication: 
2023
Series/Report no.: 
WIDER Working Paper No. 2023/21
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
Improving tax collection is essential if developing economies are to avoid over-reliance on external donor funds and loans. Revenue authorities in the Global South have recently adopted new policy tools to improve domestic revenue mobilization through taxes. One such new policy is a withholding system for value-added tax (VAT). In this study, we investigate the impact of adopting a system for withholding value-added tax on VAT collection in Zambia. While similar systems are in place in many countries, empirical research into their impact is still limited and inconclusive. Using a difference-in differences approach, we estimate the impact of introducing such a system in Zambia on the value added, sales, purchases, and output VAT of affected firms. We observe significant positive impacts after the reform on those indicators that the withholding agent reports and on remits to the tax authority. We find that the reform improves compliance with the introduction of a change in the tax remitting liability in the transaction chain.
Subjects: 
withholding VAT
tax compliance
tax administration
Africa
withholding VAT
tax compliance
tax administration
Africa
JEL: 
H25
H26
H32
H71
Persistent Identifier of the first edition: 
ISBN: 
978-92-9267-329-1
Document Type: 
Working Paper

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