Monash University

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Explaining the rise of the value added tax - a challenge to the conventional approach

posted on 2017-02-06, 02:14 authored by James, Kathryn Anne
Over little more than half a century, the value added tax (VAT) has risen to become one of the world’s most dominant revenue instruments. However, very little is known about what has contributed to the VAT’s rapid rise. This dissertation contends that this gap is due in part to neglect and in part to the dominance of a received explanation that attributes the VAT’s rise to its merits. Upon closer examination, this explanation generally rests on the merits of an ideal or good VAT that is rarely, if ever, realised in practice by the real VATs that have actually been introduced. This dissertation contends that the discrepancy between the good VAT and real VATs is one of many factors which demonstrate the inadequacy of the merits-based explanation of the VAT’s rise. In light of the fact that it is real VATs that have actually risen, this dissertation proposes a new approach to explain the rise of these real VATs. To demonstrate the benefits of an alternative approach, the dissertation draws on policy analysis to examine two case studies, the introduction of a VAT in Australia and the resistance to VAT reform in the United States. The case studies reveal that merits are unable to account for both the decision to adopt a VAT and for the real VATs that get adopted. The analysis shows that an understanding of the histories and institutions that both enable and constrain policy choices is crucial to explaining the rise of real VATs. This dissertation continues, however, where most policy accounts end and focuses on the interaction between these local histories of VAT reform and key decisions relating to the legal design, administration and implementation of the VAT. This focus on law enables insights into real VATs that are lost in many policy accounts of VAT reform or that are ignored, downplayed or insufficiently accounted for in the conventional merits-based explanations of the VAT’s rise. This dissertation makes a significant contribution to both tax law and policy analysis. The challenge it presents to conventional understandings of the VAT’s rise, in turn, reveals new insights into the rise of this important revenue instrument. The law in this dissertation is at 31 January 2012.


Campus location


Principal supervisor

Graeme Hodge.

Additional supervisor 1

Stephen Barkoczy.

Additional supervisor 2

Patrick Emerton.

Year of Award


Department, School or Centre



Doctor of Philosophy

Degree Type



Faculty of Law

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