Importance of VAT in government budgets



Year of publication 2019
Type Article in Proceedings
Conference Proceedings of the 16th International Scientific Conference European Financial Systems 2019
MU Faculty or unit

Faculty of Economics and Administration

Keywords value added tax; government revenues; VAT to GDP ratio; tax rate; effective tax rate; VAT Gap
Description Value added tax (VAT) is one of the most important government revenue sources globally. It is especially significant for the European Union countries known for above average public expenditure. This article aims to analyze importance of VAT in government budgets of the European Union countries and investigate various factors that can influence VAT revenue. VAT significance can depend on various circumstances, for instance on the level of economic development, fiscal policy, tax policy etc. One of the important aspects related to VAT revenue is VAT Gap. It measures revenue loss due to tax avoidance, fraud, evasion and due to bankruptcies, financial insolvencies or miscalculations. We compare European Union countries according to selected criteria and aim to analyze reasons behind VAT importance among government revenue sources. Data about taxation are mainly provided by Eurostat. VAT Gap report published by European Commission is used for data about VAT Gap and certain other VAT information. We use regression analysis to assess impact of VAT Gap, VAT rates, GDP per capita and geographical location on VAT revenues.
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