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Abstract
Value-added tax (VAT) is often considered the best way of promoting fairness and uniformity of tax burden and to offer incentives to promote efficient resource allocation. The tax is a sales tax whose incidence, in principle, only falls on the consumers. The tax is collected as a proportion of the added value generated in the production of goods and services at each stage of the production and distribution chain. The VAT, as a vigorous source of revenue closely linked to increases in consumption, has become a crucial part of the overall collections for all countries that use it. In this work, therefore, the focus is on how VAT operates and the problems that can arise from their application. Even still, the hypothesis that we propose postulates that taxes on products, especially those such as VAT, have many advantages for Puerto Rico. The introduction of a VAT as a substitute for selective taxes on products (excise taxes) in Puerto Rico could represent a possible alternate source of higher income for the treasury to broaden the tax base and significantly reduce evasion tax.
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