History of VAT


The history of value added tax (VAT) aims to study its evolution over time in the different countries where this tax is present, or has been at some point.

Therefore, it is a path from its origins to its reason for being, or its importance for the tax system.

However, and first of all, it must be remembered that VAT is an indirect tax levied on production, traffic and consumption. It should also be noted that there are significant variations depending on the country.

History of VAT: From Egypt to the Treaty of Rome

It seems that VAT, at least as we know it today, is an evolution of another tax that, in the past, was levied on sales.

This was common in Egypt or Athens. In the Middle Ages, in France, there was a tribute called "baddie." This was the predecessor of the Spanish alcabala, of Muslim origin.

The alcabala and the "malote" were indirect taxes levied on commercial transactions.

The second, in addition, was fundamental for the Spanish Royal Treasury in America, with Alfonso XI, in 1342, as its supporter.

As we can see, they seem clear antecedents of the VAT.

History of VAT: From France to the world

The origin of VAT as we know it today was in France.

This European country began with a production tax in 1939. However, it is the 1953-1955 tax reform that gives way to the value added tax (VAT).

The Treaty of Rome of the European Economic Community (EEC) treated it as one of its essential taxes. This resulted in the rest of the founding countries, including the Netherlands, Belgium, Luxembourg, Italy and Germany, adopting it.

History of VAT: Spain and Latin America

This tax arrived in Spain in 1986, with its entry into the EEC.

It actually replaced another indirect tax, the general business traffic tax. In this way, it copied the rest of the European countries.

On the other hand, in 1967 the Newmark report was prepared, which was the basis for tax harmonization in Europe. Three years later, in 1970, the VAT reached Latin America. Thus, Mexico, Colombia, Ecuador, Bolivia, Chile, Peru, Brazil, Argentina and Uruguay create laws to regulate it.

VAT: Examples from some countries

To finish, let's look at the VAT of some countries in Latin America and Europe.

As an example, we also recommend this ranking published on Economipedia. The comparison shown in the table is from 2020 and we have included only a few countries.

It can be seen that there are countries like Germany, in Europe, that have a lower general VAT rate. In Latin America it would be Mexico. The history of VAT has told us where it comes from and how the tax we know today has come to be.

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