Pineda Pinto, DavidBermúdez, Jose CarloScot, Thiago2024-12-122024-12-122024-12-12https://hdl.handle.net/10986/42535Late or unreliable refunds of credits undermine the best traits of value-added tax (VAT) systems and might affect firms' growth and investment opportunities. This paper uses administrative tax records in Honduras to study a tax reform that decreased the withholding rate of value-added tax liabilities by credit and debit card (DCC) providers, aiming to curb unrefunded credits. Using a difference-in-differences approach, exploiting differential exposure to the reform, the paper documents that it caused a decrease in excessive withholding and was equivalent to a cut of 1.1 percentage points in effective tax rates faced by treated firms. The paper then evaluates the effects on firms' economic performance and estimate 0 effects on several indicators of economic growth and investment. The results challenge the premise that unrefunded VAT credits are an important constraint to firm growth in certain settings. Keywords: VAT refunds, withholding, firms’ performance.en-USCC BY 3.0 IGOVAT REFUNDSWITHHOLDINGFIRMS'PERFORMANCEWorking PaperWorld Bank10.1596/1813-9450-10996