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Modelling the Impact of VAT Fiscality on Branch-Level Performance in the Construction Industry—Evidence from Romania

Author

Listed:
  • Cristina Elena Badiu (Cazacu)

    (Department of Finance, Accounting and Economic Theory, Faculty of Economics and Business Administration, Transilvania University of Brasov, 500036 Brasov, Romania)

  • Nicoleta Bărbuță-Mișu

    (Department of Business Administration, Faculty of Economics and Business Administration, Dunarea de Jos University of Galati, 800008 Galati, Romania)

  • Mioara Chirita

    (Departament of Economics, Faculty of Economics and Business Administration, Dunarea de Jos University of Galati, 800008 Galati, Romania)

  • Ionica Soare

    (Departament of Economics, Faculty of Economics and Business Administration, Dunarea de Jos University of Galati, 800008 Galati, Romania)

  • Monica Laura Zlati

    (Department of Business Administration, Faculty of Economics and Business Administration, Dunarea de Jos University of Galati, 800008 Galati, Romania)

  • Costinela Fortea

    (Department of Business Administration, Faculty of Economics and Business Administration, Dunarea de Jos University of Galati, 800008 Galati, Romania)

  • Valentin Marian Antohi

    (Department of Finance, Accounting and Economic Theory, Faculty of Economics and Business Administration, Transilvania University of Brasov, 500036 Brasov, Romania
    Department of Business Administration, Faculty of Economics and Business Administration, Dunarea de Jos University of Galati, 800008 Galati, Romania)

Abstract

Fiscal policy stands as a crucial pillar of economic development through its economic financing function. The regulatory effects of fiscality have been shown to reduce the ripple effects of uncertainties on economic growth within the EU. Unlike the average European economy, the Romanian economy has exhibited particularities concerning economic growth (ranking highly in economic growth among European nations in absolute terms), partly due to a more assertive fiscal policy applied to a consumption-based economy affected by hyperinflation (especially in the last five calendar years). The research issue stems from the premise of the lack of predictability in Romanian fiscal policy and its implications for the business environment. Our aim is to develop an econometric model of the fiscal effects of VAT on the business performance of the construction sector in Romania for the period 2010–2021. The methods employed involve empirical analysis and the development of consolidated industry-level databases followed by econometric modeling using the multiple linear regression method. The results of the research demonstrate that financial independence and solvency promote excessive taxation in emerging markets and developing countries, such as Romania, being correlated with the macroeconomic evolution of the respective state. Additionally, the results indicate that tax pressure can constitute a barrier to the sustainable development of firms, with direct repercussions for consumers. Attractiveness to investors is also affected, remaining a priority for companies. The study’s findings will enable the identification of the main impediments and opportunities brought about by VAT taxation on branch-level performance, proving useful for construction sector managers and fiscal policy makers in fostering sustainable industry development and establishing a sustainable fiscal regime to safeguard investors.

Suggested Citation

  • Cristina Elena Badiu (Cazacu) & Nicoleta Bărbuță-Mișu & Mioara Chirita & Ionica Soare & Monica Laura Zlati & Costinela Fortea & Valentin Marian Antohi, 2024. "Modelling the Impact of VAT Fiscality on Branch-Level Performance in the Construction Industry—Evidence from Romania," Economies, MDPI, vol. 12(2), pages 1-28, January.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:2:p:30-:d:1327940
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    References listed on IDEAS

    as
    1. Vanina Adoriana Trifan & Silviu Gabriel Szentesi & Lavinia Denisia Cuc & Mioara Florina Pantea, 2023. "Assessing Tax Compliance Behavior Among Romanian Taxpayers: An Empirical Case Study," SAGE Open, , vol. 13(3), pages 21582440231, September.
    2. Nicolae Al. Pop & Corina Pelau, 2017. "Correlations within the EFQM Business Excellence Model by Applying a Factor Analysis," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 19(44), pages 1-28, February.
    3. Sijbren Cnossen, 2022. "The C-inefficiency of the EU-VAT and what can be done about it," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(1), pages 215-236, February.
    4. Siglé, Maarten A. & Goslinga, Sjoerd & Speklé, Roland F. & van der Hel, Lisette E.C.J.M., 2022. "The cooperative approach to corporate tax compliance: An empirical assessment," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 46(C).
    5. Alastair Thomas, 2022. "Reassessing the regressivity of the VAT," Fiscal Studies, John Wiley & Sons, vol. 43(1), pages 23-38, March.
    6. Giulia Mascagni & Roel Dom & Fabrizio Santoro & Denis Mukama, 2023. "The VAT in practice: equity, enforcement, and complexity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(2), pages 525-563, April.
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    Cited by:

    1. Marian Socoliuc & Mihaela Ionela Socoliuc, 2024. "The Impact of the Romanian Tax System Optimizing on Sustainable Economic Development," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 497-505.
    2. Hamad Alhumoudi & Amar Johri, 2024. "Examining the Customers’ Perception Toward the Implementation of Value-added Tax in Saudi Arabia: A Financial, Economic, and Social Perspectives in Sustainable Economic Development," SAGE Open, , vol. 14(4), pages 21582440241, November.
    3. Costinela Fortea, 2025. "Government Revenue Structure and Fiscal Performance in the G7: Evidence from a Panel Data Analysis," World, MDPI, vol. 6(3), pages 1-26, July.

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