Determinants of VAT Gap in EU

Abstract

Abstract:This paper explains the term "VAT gap", and briefl y describes the calculation methods used in existing literature quantifying the VAT gap in various countries of the world. The VAT gap is calculated as the difference between the theoretical VAT liability ascertained from the national accounts and the VAT revenues accrued by the fi nancial authorities. Although VAT gap is not caused by tax evasion only, it could serve as its indicator. Further, it provides a review of scientifi c papers and various studies that analyse factors infl uencing the size of the VAT gap, and summarizes the results of these empirical studies. The main purpose of this article is to perform a regression analysis of potential variables explaining the VAT gap in 24 EU Member States in two selected years (2002 and 2006) for which data on the VAT gap was available. Two factors common for both examined years affecting the VAT gap in the surveyed countries were found, being the fi nal consumption of households and non-profi t organizations in each state, with a positive impact on the VAT gap, and the share of VAT in GDP, reducing the VAT gap. Other identifi ed variables that would explain the size of the VAT gap were the share of the shadow economy and the standard VAT rate, with a positive impact, and GDP per capita, the share in intracommunity trade, fi nal consumption of restaurant and hotel services, and the number of VAT rates, having a negative impact on the VAT gap.

The Main Performance and Effectiveness Factors of Sustainable Financial Administration Reform Using Multidimensional Statistical Tools

“…In addition to previous empirical research studies [1,2,15,16,42,43], the present empirical research realized and found other specific quantitative and qualitative factors to be relevant in the perception of the efficiency of the tax system in Slovakia. The results of the extensive study were partially consistent with findings from other authors worldwide [9,33,[35][36][37][38] and also in Czech Republic and Slovakia [42,43,47]. However, the researchers specific research focus pointed to some aspects that were critical and unique for Slovakia.…”

“…However, the researchers specific research focus pointed to some aspects that were critical and unique for Slovakia. Based on this empirical research conducted in Slovakia, it could be stated that there were different factors, which determined the perception of efficiency of the tax system in Slovakia when compared to other domestic or foreign research studies [1,15,16,33,[35][36][37][38]42,43].…”

“…This situation ultimately leads to the aforementioned decrease in the competitiveness of the state and the decrease of its credibility in the eyes of citizens [40]. The most important objectives of every country are public administration, security of the country, political stability, sustainable development of economy and tax system, which play an essential role in ensuring economic stability and sustainable progress [1,8,9,15,16,21,[41][42][43].…”

Tax gap management: theory and practice

“…Theory of national accounts provides the way for improvement of VAT taxation based on the estimate of statistical tax rates; the latter equal current tax rate multiplied by the share of goods (services) that require export compensation in GDP. «Input-output» balance approach to calculation of VAT can be used for the analysis of compliance with contemporary legislation, and minimization of cases of tax fraud and valuation of tax deductions [37].…”

VAT Gap Estimation - Czech Republic Case Study

“…Daňová mezera je měřena ve dvou krocích. Jak uvádí Zídková (2014), nejprve se určí teoretická DPH povinnost (zahrnující povinnost podle litery a ducha zákona) a poté se od takto zjištěné povinnosti odečte skutečně finančními autoritami (na akruálním principu) vybraná daň.…”