Value Added Tax : Murky Waters

Murky Waters A correspondent writes:
The decision that all state governments should change over from sales tax to value added tax(VAT) is an extremely important one. The sales tax is a major source of revenue for practically all the states and their reluctance to change will be overcome only after the union government has agreed to make up for the loss in revenue the states must suffer on account of the shift from sales tax to VAT. It is not clear what estimates the union government has made of the loss of revenue that each state is likely to suffer. It is also not known if the individual states have made any estimates. The problem the states will face in making the change over will be not only of revenue loss but also of increased expenditure in the administration of VAT, because the present sales tax departments may not be able to cope with the enforcement of VAT with their existing strength.