WHAT RATE STRUCTURE FOR A VALUE-ADDED TAX?

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Abstract
To lessen the regressivity of their valueadded taxes, member countries of the European Economic Community (EEC), except Denmark, impose lower than general rates on products regarded as essential. To introduce a progressive element, three countries also levy higher than general rates on luxury articles. Drawing on experience with the value-added tax in the Netherlands, the author of this article argues that reduced or increased rates make little sense; instead a unified rate is proposed. His observations should carry weight in countries that may consider the adoption of a value-added tax at some future date, as well as in countries that already have such a tax but contemplate changing the rate structure.

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