The Main Features of Value Added Tax as a Reliable Source of Revenue for Municipalities

In recent years, Value Added Tax (VAT) has changed into an important part of the revenue of the municipalities. Hence, becoming familiar with different types of VAT, its methodology, its collection method, and its properties are of great importance. The current article, firstly, introduces the concept of added value and the tax imposed on it. Then, the background of VAT and its origin is investigated. Next, different types of VAT, like VAT on production, income, and consumption, are elaborated on and the role of VAT in the law on direct taxes is investigated. In the rest of the paper, the features of VAT as a sustainable revenue resource for municipalities are introduced. From among other issues the current article draws on are the issue of tax evasion and the implementation method of VAT in different areas of profession. It should be noted that as tax is a kind of financial instrument, it has economic effects and consequences which show themselves in the form of inflation and investment effects in cities. Therefore, the municipalities are directly or indirectly affected by such kind of tax. At the end, the article, after referring to the advantages of VAT, investigates into the necessity of utilizing VAT as a sustainable revenue resource for municipalities of Iran.