The Role of Value Added Tax in Municipalities Revenue System

Value Added Tax (VAT) is the subcategory of the new taxes introduced after the Second World War in European countries. At the moment, such a tax system is implemented in most countries. VAT is the commonest type of tax the government and the municipalities collect to pay their expenses and is a kind of tax on goods and services (consumption tax). The investigations and the experience of collecting such a tax in different countries show that the implementation of such a law may help solving some of the current problems of taxation system like tax revenue, identifying taxpayers and collecting enough information about them, reducing the time for tax payment, preventing tax evasion, etc. The current research takes an analytical approach and aims at investigating the role of VAT in the revenue system of the municipalities. However, the main issue in financing and reforming the financial resources of the municipalities is the sustainability of revenue resources in a way that such revenue, in addition to being reliable and durable, would not be a threat to the urban sustainable development. It should be added that although collecting taxes will result in an increase in the municipalities revenue, the urban managers are to seek innovative approaches to obtain revenue so that the citizens will not be forced to directly pay the expenses of the city.