LESSONS FOR POLICY MAKERS FROM THE HISTORY OF CONSUMPTION TAXES

A consumption-based tax system has attracted a variety of supporters, including proponents of tax simplification and policy makers in search of more or alternative revenue sources. Such a system could involve the use of a value-added tax (VAT) or a sales tax. Policy makers and legislators should consider the history of the background of the VAT. A cursory review of the development of sales taxes is presented as a background for the problems that might be encountered in adopting the VAT. This review of the historical development shows that there are numerous and complex issues requiring careful study.