12th WCSA International Conference. – Working paper approved to be presented.
In 2020 the OECD found that tax systems that use the Value-Added Tax (VAT) usually promote proportionality, or a lower level of either progressivity or regressivity. When based on the equity principle, the objective of these systems is to adopt the highest possible level of progressivity, which means more equity between taxpayers through contributions according to individual or family capacity. The VAT challenges policymakers, demanding an effective way to promote higher levels of progressivity. This communication presents the tax refund (cashback) as a component of Personalized Value-Added Tax (PVAT), and one alternative that, besides exemptions and reduction of tax rates, may increase the progressivity level. This tax policy needs to identify who should receive a different tax treatment, to adopt an objective criterion to determine the amount to be released for those who need a different tax treatment, and to create a return mechanism for the amount. It finally identifies and discusses how three jurisdictions (Brazil, Uruguay and Canada) promote or intend to promote the cashback component of PVAT.
Keywords: PVAT; Cashback; Equity; Comparative tax law.
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