The VAT in Practice: Equity Enforcement and Complexity

The Value Added Tax (VAT) is the single largest source of revenue in many countries, raising on average about a quarter of total tax collected and almost 40 per cent in African countries. The theoretical case for adopting a VAT, as opposed to other consumption taxes, is widely supported by tax experts and academics. However, even the VAT’s strongest supporters acknowledge that its practical implementation is often problematic especially in low-income countries. This research examines how the VAT system functions in practice in Rwanda – highlighting important implications for equity and efficiency.