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VAT efficiency in the countries worldwide

Author

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  • Sokolovska, Olena
  • Sokolovskyi, Dmytro

Abstract

The article aims to estimate the efficiency of value-added tax (VAT) collection in the countries worldwide. In a large part of developing and transition countries VAT performs primarily fiscal function, being the main source of budget revenue (for example in 2014 in Ukraine the revenue obtained from VAT was 51% of total tax revenue, in Moldova it achieved 58,2%). At the same time the shadow economy particularly in form of corruption and tax evasion that exists in these countries leads to a considerable tax gap which in turns reduces VAT efficiency. So, the present study intends to define the VAT efficiency ratio in countries of the world. Preliminary theoretical and methodological analysis allowed us to use for calculations a modification of widespread formula, considering in a certain way a tax evasion process. We investigated the dependence between VAT efficiency ratio and size of shadow sector and level of corruption in countries. This research will allow further investigation of the strategies for establishing of optimal VAT rates depending on efficiency of its levying and size of taxpayers which in turns will contribute to raising efficiency of VAT administration, to the reduction of shadow sector and to the economic growth.

Suggested Citation

  • Sokolovska, Olena & Sokolovskyi, Dmytro, 2015. "VAT efficiency in the countries worldwide," MPRA Paper 66422, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:66422
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    File URL: https://mpra.ub.uni-muenchen.de/66422/1/MPRA_paper_66422.pdf
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    References listed on IDEAS

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    4. Luca Barbone & Misha V. Belkindas & Leon Bettendorf & Richard Bird & Mikhail Bonch-Osmolovskiy & Michael Smart, 2013. "Study to quantify and analyse the VAT Gap in the EU-27 Member States," CASE Network Reports 0116, CASE-Center for Social and Economic Research.
    5. O'Donoghue, Cathal & Mantovani, Daniela & Baldini, Massimo, 2004. "Modelling the redistributive impact of indirect taxes in Europe: an application of EUROMOD," EUROMOD Working Papers EM7/01, EUROMOD at the Institute for Social and Economic Research.
    6. Agha, Ali & Haughton, Jonathan, 1996. "Designing VAT Systems: Some Efficiency Considerations," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 303-308, May.
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    Cited by:

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    2. Anna Kowal & Grzegorz Przekota, 2021. "VAT Efficiency—A Discussion on the VAT System in the European Union," Sustainability, MDPI, vol. 13(9), pages 1-16, April.
    3. Cyril Chimilila & Remidius Ruhinduka & Vincent Leyaro, 2023. "The design and revenue impact of a tax receipts lottery: A lab experiment in Tanzania," Discussion Papers 2023-02, University of Nottingham, CREDIT.
    4. Lapinskas, Arunas & Makhova, Larisa & Haikin, Mark & Troyanskaya, Marija & Mutalimov, Verdi, 2023. "Longevity of EU membership and VAT practices: Dependencies, Contradictions And Implications," Journal of Policy Modeling, Elsevier, vol. 45(3), pages 630-643.
    5. Michael Safo OFORI, 2021. "Real Gross Domestic Product as Value Added Tax Base: Evidence from Ghana," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 5(1), pages 43-63.
    6. Michael Safo OFORI & Abel FUMEY & Edward NKETIAH-AMPONSAH, 2020. "Forecasting Value Added Tax Revenue in Ghana," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 4(2), pages 63-99.

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    More about this item

    Keywords

    VAT; efficiency; shadow sector; corruption;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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