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  • Print publication year: 2015
  • Online publication date: February 2015

15 - Interjurisdictional Aspects



Almost all national-level (central-government) VATs rely on the destination principle to tax international transactions, with tax imposed on imports and removed from exports. The adoption at the subnational level of some form of VAT (see Table 2.7 for a review of the forms) is being debated or enacted in many countries. There has been renewed interest in the problems of cross-border trade in the EU and within federal systems, especially in Canada, India, Brazil, and the United States. In addition to the long-standing problems faced by the EU and federal countries with cross-border trade, some of the recent attention to these issues has been propelled by the explosion of trade over the Internet (electronic or e-commerce). Indeed, the US Congress enacted a moratorium on subnational (state level) taxes on Internet access and on multiple or discriminatory taxes on e-commerce.

Subnational units of government should control the revenue necessary to provide the services that they render. In any federal system, the fiscal authority and responsibility of subnational (referred to in this chapter also as regional) units of government must be established. To possess ultimate fiscal autonomy, subnational units of government should have the authority to choose the taxes to be levied, define their tax bases, set their tax rates, and administer the taxes they impose, but these elements can also be shared with national government.

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