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VAT Evasion and Its Consequences for Macroeconomic Clearing in the EU

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Author Info
Andrea Gebauer
Chang Woon Nam
Rüdiger Parsche
Abstract

Full movement from the destination principle to the origin principle would lead to changes in VAT revenues in EU countries. Hence a clearing mechanism is necessary to rectify such imbalances. To estimate the relevance of VAT evasion this study quantifies the annual amounts of hypothetical VAT revenues based on national-accounts data. The relation between hypothetical and collected revenues indicates the tax collection performance rate, and this determines the extent of VAT evasion. Macroeconomic clearing is supposed to occur in the EU, based on the national share of hypothetical revenues of the member countries. Yet this system suffers from adverse incentives for individual nations, since those with a higher evasion ratio will gain: For those countries with an above-EU-average evasion rate the sum of apportioned VAT revenues will be larger than the anticipated collected revenues in the case of prevailing current tax practice.

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Publisher Info
Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 61 (2006)
Issue (Month): 4 (February)
Pages: 462-487
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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200602)61:4_462:veaicf_2.0.tx_2-0

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Related research
Keywords: VAT evasion EU Single Market origin principle destination principle macroeconomic clearing national accounts

Find related papers by JEL classification:
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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This page was last updated on 2008-8-1.

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