VAT treatment of financial services : assessment and policy proposal for developing countries

This article first examines the current VAT treatment of financial services in Canada and around the world and its rationales and economic effects. The article then outlines alternatives to that treatment, focusing on developing and transitional economies and their tax policy constraints. Finally, the article considers the best practices for tax reform and proposes a new alternative to the exempt treatment: a hybrid system designed to capture VAT revenues in developing and transitional economies in a practical way.