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Trends in income taxation: are taxes converging in Central and Eastern European countries?

Author

Listed:
  • Bernardelli Michał
  • Felis Paweł
  • Jamroży Marcin
  • Lipiec Jacek
  • Malinowska-Misiąg Elżbieta
  • Szlęzak-Matusewicz Joanna
  • Otczyk Grzegorz

    (SGH Warsaw School of Economics, Warsaw, Poland)

Abstract

The paper examines the convergence of tax systems in Central and Eastern European countries (CEECs) over the period 1995–2018. Due to the increasing impact of tax competition, we have focused on income taxes, in particular, corporate ones. We have identified the factors that influence the taxation system and trends in income taxation in the CEECs by adapting the hidden Markov model approach. We find that many CEECs have reduced income taxation in the analysis period, mainly by lowering tax rates. Corporate income taxes have also decreased in many CEECs in the same period; however, the reverse has been observed too. Both convergence and divergence have been identified among the CEECs over the period considered. The speed of these processes based on the used variables varied depending on both exogenous and endogenous factors. These factors have been diagnosed as being specific to the periods of tax reforms, i.e., before and after accession to the European Union (EU) and the global financial crisis.

Suggested Citation

  • Bernardelli Michał & Felis Paweł & Jamroży Marcin & Lipiec Jacek & Malinowska-Misiąg Elżbieta & Szlęzak-Matusewicz Joanna & Otczyk Grzegorz, 2023. "Trends in income taxation: are taxes converging in Central and Eastern European countries?," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 59(4), pages 349-370, December.
    • Handle: RePEc:vrs:ijomae:v:59:y:2023:i:4:p:349-370:n:4
    DOI: 10.2478/ijme-2023-0019
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    More about this item

    Keywords

    income tax; tax competition; tax convergence;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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