More countries are adopting the VAT, and its contribution to global revenue is rising
Two thousand years ago when the emperors of China began building a great wall to defend their domain from fearsome warriors from the steppes, they paid for it in part through a tax on salt. The Chinese salt tax, which dates back to the third century BC, is one of the world’s earliest examples of a tax on a consumer good.
These taxes trace their often turbulent history through excises on tea and tobacco to the more widely applied turnover taxes of the 20th century. Today’s modern equivalent is the value-added tax, or VAT. It has become a major source of revenue for the more than 160 countries that impose it, raising, on average, over 30 percent of their total tax take. (A notable exception is the United States, which doesn’t have a VAT.) As a share of GDP, it brings in between 4 percent in low-income developing countries and more than 7 percent in advanced economies. As such a visible source of revenue, VAT has attracted all sorts of criticism, sometimes fair, sometimes not, as it is often poorly understood.
Source IMF
