The Impact of Fiscal Freedom, Government Effectiveness and Human Development Index on the VAT GAP in the European Union

Butu, Ionela; Brezeanu, Petre

doi:10.2478/9788366675704-030

Cited by 1 publication

(5 citation statements)

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“…Our study positions itself next to the findings of Kelm (2022), Butu and Brezeanu (2021), Z ıdkov a (2014) and Majerov a (2016), validating the indirect relationship between development and compliance VAT gap. As such, the higher the economic development is, proxied through per capita GDP (GDPcap in Table 3 model (3) and Table 4, models (3)-( 6)), the lower the VAT gap is.…”

Section: Methodssupporting

confidence: 80%

“…This is an original determinant, not being found in the literature before. Still, previous studies have used various good governance proxies such as government effectiveness, rule of low or PS (Butu and Brezeanu, 2021; Olexová et al ., 2022), with similar supporting arguments as ours.…”

Section: Resultsmentioning

confidence: 99%

“…This proxy is often used as a reflection of ongoing financial and economic crime phenomena. Various studies from the specialized literature cited before document that the relationship between financial and economic crime and compliance VAT gap may be moderated by various control variables such as the level of economic development (Zídková, 2014; Majerová, 2016; Achim and Borlea, 2020; Pluskota, 2022; Kelm, 2022), institutional quality (Butu and Brezeanu, 2021; Olexová et al ., 2022), final consumption (Zídková, 2014; Zídková and Pavel, 2016; Pluskota, 2022), VAT revenues (Carfora et al. , 2020), standard VAT rates (Zídková and Pavel, 2016; Majerová, 2016), difference between the VAT rates (Zídková and Pavel, 2016) and even the number of VAT rates (Zídková, 2014).…”

Section: Methodsmentioning

confidence: 99%

“…share of household consumption in GDP, standard VAT rate and difference between standard and reduced rate (DIF), and a factor with a negative impact on the VAT gap, the VAT revenues on GDP. Butu and Brezeanu (2021) have also studied the relationship between VAT gap as a percent of VTTL and fiscal freedom (inverse relation), government effectiveness (direct relation, although not significant) and human development index (inverse relation) as a sustainable development proxy, for EU countries throughout 2000-2018. Olexov a et al (2022 have also focused on the relationship between VAT (as a share of VAT total tax liability) and various indicators that reflect the quality of governance (voice and accountability; political stability (PS), absence of violence or terrorism; effectiveness of government; quality of regulation; the rule of law; control of corruption, provided by the World Governance JRF 25,2 Indicators database from World Bank Data) in selected Central and Eastern European countries, using data that span from 2000 to 2019.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Butu and Brezeanu (2021) have also studied the relationship between VAT gap as a percent of VTTL and fiscal freedom (inverse relation), government effectiveness (direct relation, although not significant) and human development index (inverse relation) as a sustainable development proxy, for EU countries throughout 2000–2018. Olexová et al .…”

Section: Literature Reviewmentioning

confidence: 99%

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The determinants of compliance VAT gap

Cuceu,

Florescu,

Văidean

2024

JRF

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PurposeThis paper aims to analyze the potential variables explaining the compliance value added tax (VAT) gap, which basically represents an estimate of the unpaid VAT in the economy. A major component of compliance VAT Gap is represented by tax fraud; there exist other causes too, like insolvencies, bankruptcies, optimizations practices and maladministration. The objective of our paper is to revisit the main determinants of the VAT compliance gap for the European Union (EU)-27 member states. Using econometric modeling, our study identifies the relationship between the VAT gap and various determinants of it.Design/methodology/approachOur work focuses on the shadow economy, final consumption, VAT revenues, standard VAT rates, differences between the standard and reduced rates, economic prosperity, press freedom, political stability and others, as determinants of European VAT compliance gaps, for the 2005–2020 time interval. The methods include panel data analysis through simple and multiple regression modeling, the combinatorial approach, fixed and random effects.FindingsOur study validates the direct impact of shadow economy and the indirect impact of VAT revenues, economic prosperity and press freedom, upon VAT compliance gaps. Upon subsampling of EU member states within old and new ones, our results estimate a larger positive impact of shadow economy upon old member states, compared to new ones.Practical implicationsThe policy implications include leverage effects of governments acting upon a reduction in shadow economy phenomena and boosts of economic development, political stability and press freedom, in order to attain the contraction of compliance VAT gaps.Originality/valueOur paper sheds light in a poorly explored scientific area, that of the determinants of VAT gap, especially in relationship with financial and economic crime phenomena.

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Section: Methodssupporting

confidence: 80%

Section: Resultsmentioning

confidence: 99%