Not panacea—not effective without credible enforcement mechanisms.
Traders may not use (even in U.S. bars, restaurants, and small establishments).
Traders may enter lower sales values.
Insufficient information for sales taxation administration (for administration, 4 types of records needed: (1) records of total sales; (2) purchase invoices; (3) annual inventory data; and (4) evidence to support deductions—but cash register does not tell all!)
High compliance costs to small businesses.
Balancing acts…VAT from administration’s and taxpayers’ perspectives
Multiple types of fraud by traders.
Multiple types of abuse and corrupt behavior by tax collectors.
Arbitrarily raise assessments either to fulfill collection targets or to create opportunities for bribery.
Demand bribery for expediting approval of refunds.
Perform repeated audits or unduly lengthy audits.
Perform repeated or unnecessary queries on traders.
Be reluctant to provide clarifications to traders’ inquiries.