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Fiscal sustainability vs tax gap – Evidence from Poland

Author

Listed:
  • Tomasz Uryszek

    (Department of Banking, Faculty of Economics and Sociology, University of Lodz, Poland)

  • Alina Klonowska

    (Department of Economics and Food Economy, University of Agriculture in Cracow, Al. Mickiewicza 21, 31-120, Krakow, Poland)

Abstract

The main goals of the article are to investigate the level of fiscal unsustainability in Poland and estimate the tax gap necessary to stabilize the size of the public debt and to follow a path to fiscal sustainability. It hypothesizes that by closing the tax gaps for value-added tax (VAT) and personal income tax (PIT), Poland can cover most of its current fiscal needs and stabilize the country’s fiscal situation. We estimated a modified version of the equation describing Ponzi games, calculated the primary gap indicator, and conducted cointegration tests for ex-post data on public expenditures and revenues to investigate the actual level of fiscal unsustainability. The research period covers yearly observations between 2003 and 2017. Empirical evidence confirmed our research hypothesis. We found out that closing the tax gap could change the situation dramatically. If the public authorities were able to collect the VAT and PIT that currently go uncollected, Poland could easily embark on the path towards fiscal sustainability.

Suggested Citation

  • Tomasz Uryszek & Alina Klonowska, 2022. "Fiscal sustainability vs tax gap – Evidence from Poland," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 72(1), pages 85-103, March.
    • Handle: RePEc:aka:aoecon:v:72:y:2022:i:1:p:85-103
    DOI: 10.1556/032.2022.00005
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    Keywords

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    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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