Rethinking the exemptions in Value-Added Tax

The decision by the Minister to practically eliminate the long list of zero-rated items, making most of them exempt, has raised some basic questions about Value-Added Tax. It also shows how impermanent, and uncertain taxes can be, even though certainty and predictability are considered necessary features of a good tax system.

This principle applies to VAT as it does to any other issue or tax but for now we look at the principle which underlies VAT and which makes it so attractive. The first principle is that VAT should be broad-based with few exemptions and a