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How Important is the Structure of the EU Economy to the VAT Collection?

Author

Listed:
  • Hana Zídková
  • Spyros Papadakis
  • Markéta Arltová
  • Ioannis Lomis
  • Anna Christou

Abstract

VAT is one of the most important sources of the public revenues in the EU Member States; therefore, it is crucial to determine the factors of VAT collection. So far, only a few researchers analyzed the influence of individual economic sectors on the indicators of VAT collection, namely Compliance and Policy gaps. Therefore, the authors used the autoregressive distributed lag (ARDL) and Error Correction (EC) models to study the relationship between eleven economic sectors, the VAT Compliance Gap and the VAT Policy Gap, which were selected as the dependent variables. The research focused on twenty-five EU member states, and the examined time period was from 2005 to 2020. The results showed that the Compliance Gap is affected increasingly by the Construction and Arts sectors and decreasingly by the Agriculture and Manufacturing sectors. The Policy Gap was increasingly affected by the Real Estate, Public Administration, and Financial Services sectors. These findings established which economic sectors should receive 'special attention' from tax administrations in the EU countries to tackle tax evasion, and which are the most critical in making strategic decisions regarding tax legislation.

Suggested Citation

  • Hana Zídková & Spyros Papadakis & Markéta Arltová & Ioannis Lomis & Anna Christou, 2025. "How Important is the Structure of the EU Economy to the VAT Collection?," Prague Economic Papers, Prague University of Economics and Business, vol. 2025(1), pages 1-25.
    • Handle: RePEc:prg:jnlpep:v:2025:y:2025:i:1:id:880:p:1-25
    DOI: 10.18267/j.pep.880
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    References listed on IDEAS

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    1. Michael Keen, 2013. "The Anatomy of the Vat," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(2), pages 423-446, June.
    2. Christou Anna & Eriotis Nikolaos & Lomis Ioannis & Papadakis Spyros & Thalassinos Eleftherios, 2021. "The Greek VAT Gap: The Influence of Individual Economic Sectors," European Research Studies Journal, European Research Studies Journal, vol. 0(4 - Part ), pages 851-882.
    3. Rafał Balina & Marta Idasz-Balina & Noer Azam Achsani, 2021. "Predicting Insolvency of the Construction Companies in the Creditworthiness Assessment Process—Empirical Evidence from Poland," JRFM, MDPI, vol. 14(10), pages 1-16, September.
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    5. Dmitry Yu. Fedotov & Ekaterina N. Nevzorova, 2020. "Intersectoral Shadow Economic Linkages and their Impact on Tax Evasion," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 6(1), pages 36-53.
    6. Case & Cpb & Capp & Cepii & Etla & Ifo & Ifs & Ihs, 2015. "Study to quantify and analyse the VAT Gap in the EU Member States - 2015 Report," Taxation Studies 0061, Directorate General Taxation and Customs Union, European Commission.
    7. Grzegorz Poniatowski & Mikhail Bonch-Osmolovskiy & José María Durán-Cabré & Alejandro Esteller-Moré & Adam Œmietanka, 2018. "Study and Reports on the VAT Gap in the EU-28 Member States: 2018 Final Report," CASE Reports 0496, CASE-Center for Social and Economic Research.
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    More about this item

    Keywords

    value added tax (VAT); dynamic panel data model; VAT compliance gap; policy gap; economic sectors;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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