As in the European Union the activities of public sector bodies are not subject to full taxation, the Value Added Tax (VAT) regime may cause distortions in their decision-making, in particular with respect to the choice between self-supply and contracting out of services to the private sector. Several European countries have addressed this distortion via a budgetary solution. In the Netherlands, such a refund scheme was introduced in 2003. This article provides an integral analysis of this scheme based on a broad range of evaluations.

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