Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Department of Finance, Copenhagen Business School Working Paper Series, Department of Finance, Copenhagen Business School

No 2003-1:
Reimbursement of VAT on written-off Receivables

Bjarne Florentsen, Michael Møller and Niels Christian Nielsen

Abstract: In many OECD countries, a seller has a right to reimbursement of VAT (RVAT) she has paid on goods sold, but for which she has not yet received payment. Such reimbursement of VAT on receivables is economically inefficient. It leads to:

• Distortion of credit markets, by subsidizing direct credit at the cost of financial intermediaries.

• Price discrimination, by subsidizing buyers with low creditworthiness.

• A less efficient collection of bad debts, as trade with bad debts is made extremely expensive.

The finance literature presents several “good” arguments in favor of trade credits, e.g. transaction costs and asymmetric information. In contrast RVAT is an economically “bad” argument for trade credit. It is a subsidy that leads to inefficiently high use of trade credit.

Keywords: bad debt; receivables taxes; trade credits; VAT; (follow links to similar papers)

JEL-Codes: H20; (follow links to similar papers)

19 pages, July 10, 2003

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

7193    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Lars Nondal ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:cbsfin:2003_001 This page was generated on 2014-12-14 19:21:43