Contracting out: The Importance of a Solution for the VAT Distortion

Wassenaar, Mattheus

doi:10.1093/cesifo/50.2.377

Cited by 17 publications

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“…Not surprisingly, in member states with a solution to this VAT-distortion, the percentage of private refuse collection is relatively high (Wassenaar and Gradus, 2004). …”

Section: Vat-compensation In the Netherlandsmentioning

confidence: 99%

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Contracting Out: Dutch Municipalities Reject the Solution for the VAT Distortion

Wassenaar

Dijkgraaf

Gradus

2010

Local Government Studies

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In 2003, the Dutch government introduced a VAT-compensation fund in order to create a level-playing field for local governments with respect to Value Added Tax (VAT). By introducing this fund the tax difference between governments that supply services themselves and governments that contract out to the private sector was eliminated. This paper shows, however, that according to most of the municipalities differences in VAT treatment did not hinder the contracting out of public services. Therefore, the fund lacks a great deal of its legitimacy. More important, the fund is not effective, as the number of contracted public services has hardly increased since the introduction. In general, municipalities have a negative opinion about this fund. They state that more than the budgetary effects, other arguments are relevant in the decision-making on the outsourcing of activities such as the quality of services and the employment in the own municipality. As the budgetary position for a number of municipalities will decline in the near future, the fund still may stimulate the outsourcing of public services in future.

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“…Not surprisingly, in member states with a solution to this VAT-distortion, the percentage of private refuse collection is relatively high (Wassenaar and Gradus, 2004). …”

Section: Vat-compensation In the Netherlandsmentioning

confidence: 99%

“…By the design of the grant reduction, differences in cost-structure between municipalities and provinces are taken into account. Therefore, the fund has not lead to a significant redistribution of funds between individual municipalities and provinces (Wassenaar and Gradus, 2004).…”

Section: Vat-compensation In the Netherlandsmentioning

confidence: 99%

Contracting Out: Dutch Municipalities Reject the Solution for the VAT Distortion

Wassenaar

Dijkgraaf

Gradus

2010

Local Government Studies

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“…6. While there would be no net revenue gain from doing so, it would avoid potentially significant distortions in resource allocation by both private and public decision makers (Wassenar and Gradus 2004).…”

Section: Notesmentioning

confidence: 99%

Taxing Consumption in Jamaica

Edmiston

Bird

2007

Public Finance Review

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In Jamaica, as in most countries, consumption taxes in the form of a value-added tax called the general consumption tax (GCT) and several excise taxes collectively known as the special consumption tax (SCT) are critically important revenue sources, accounting for 37.4 percent of total revenues in fiscal year 2003-2004 (27.7 percent for GCT alone) and an estimated 11.2 percent of GDP (8.3 percent for GCT alone). This article describes in some detail the present structure and administration of the GCT and SCT and then evaluates the performance of these taxes from several angles—their revenue effects, their distributional effects and their relation to the shadow economy, their administrative aspects, and their relation to various international considerations. It concludes by setting out a number of recommendations for reform.

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“…Therefore, public authorities cannot make an optimal decision to achieve efficiency gains or for nonbudgetary considerations. As in northern European countries, the Dutch government in 2003 introduced a refund scheme to address this distortion (Wassenaar and Gradus, 2004). However, as Wassenaar et al (2010) show, this did not lead to a significant change in contracting out.…”

Section: Introductionmentioning

confidence: 99%

Contracting Out, an Empirical Study on Motives

Wassenaar

Groot

Gradus³

2010

SSRN Journal

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Municipalities may have various motives for decisions on the mode of their task execution. Empirical studies -based on both public choice and transaction costs theory -have not yet provided a fully comprehensive explanation for municipal contracting out decisions. Therefore, we held interviews with Dutch municipal managers about the motives for the actual mode of service provision. This study provided the opportunity to investigate the relevance of motives on contracting out, to explore of additional motives and to test these statistically. As we find, municipalities do not regularly evaluate the service provision of their activities. Only in case of structural underperformance, municipalities consider a change of service provider, and then, the efficiency motive is most relevant. However, we conclude that institutional motives -as the stability of service provision -are relevant for contracting out decisions as well.

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Contracting out: The Importance of a Solution for the VAT Distortion

Cited by 17 publications

References 0 publications

Contracting Out: Dutch Municipalities Reject the Solution for the VAT Distortion

Contracting Out: Dutch Municipalities Reject the Solution for the VAT Distortion

Taxing Consumption in Jamaica

Contracting Out, an Empirical Study on Motives

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