Categorisation of EU countries in terms of the impact of crisis periods on value-added tax

The categorisation of EU countries based on their reactions and approach to value-added tax (VAT) during crisis periods can be divided into several groups according to how countries responded to crises such as economic recessions or the COVID-19 pandemic. The responses of individual countries included adjustments to VAT rates, the introduction of tax incentives, payment deferrals and other measures to mitigate the impact of the crisis on the economy. The present research focuses on identifying, analysing and evaluating the impact of crises on VAT. Its main objective is to develop an economically meaningful categorisation of EU countries based on the level of the basic VAT rate and macroeconomic and institutional indicators. We included gross domestic product, population, unemployment, inflation and international trade among the macroeconomic indicators. Further, the paper uses institutional indicators of government effectiveness and more narrowly focused indices such as control of corruption and legislation. The classification of countries is divided into three periods 2004, 2008 and 2020. The crisis periods 2008 (global financial crisis) and 2020 (pandemic crisis) are compared with the base period 2004 in the research. The analysis is complemented by the evolution of rates and the incidence of applied measures in the European Union countries under study. The categorisation of countries was carried out on the 28 member countries, considering the actuality of membership in the year under review. To categorise groups of countries within the European Union, we used four analysis methods: rate change analysis, principal component analysis, correlation analysis and cluster analysis of hierarchical type (Ward method). The research results show a significant impact of crisis periods on the categorisation of countries. Despite the crisis periods, the most developed EU economies have maintained their economic growth in contrast to other countries. This is evidenced by the fact that the cluster analysis method separated them into a distinct cluster in each period under study. The research further showed that EU Member States applied changes to their tax rates on goods and services mainly after the global financial crisis. During the pandemic crisis, it became apparent that measures other than a change in the basic tax rate were applied. These measures are mainly adjustments to reduced tax rates, financial incentives, employer support, etc. In particular, the use of reduced tax rate adjustments and support to employers through wage cost recovery has proven to be an effective way of increasing tax revenue and a form of assistance.