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VAT Design and Energy Trade: The Case of Russia and Ukraine Clinton R. Shiells Full Text of this Article (PDF 112K) Abstract: Given the substantial
rents involved in oil and gas trade and the incentives for noncooperative
behavior, Russia and Ukraine have chosen to deviate from standard tax
considerations, which suggest the use of a destination-based value-added
tax (VAT) regime. Oil and gas trade is a major source of Russian tax revenue,
which is collected partly through an origin-based VAT on energy trade
within the Commonwealth of Independent States. This paper shows that,
if nondistorting taxes were unavailable, Ukraine would benefit by taxing
away the pure profits of the domestic seller of natural gas imports from
Russia. The paper also assesses the circumstances under which Ukraine
would benefit from simultaneously providing a credit for Russian VAT payments
by importers. |
