C EFFICIENCY RATIO AS A MEASURE OF VAT EFFICIENCY IN EU DEVELOPING COUNTRIES AND SERBIA

University of Niš, Faculty of Economics, Serbia
Serbia

University of Niš, Faculty of Economics, Serbia
Serbia

University of Niš, Faculty of Economics, Serbia
Serbia


Abstract

The policy led by a large number of developing countries, with the aim of increasing indirect taxes, has opened the issue of Value Added Tax (VAT) efficiency. Reforms of tax systems of developing countries generally involve an increase in standard rates in order to increase VAT, which is the main source of public revenues. In such a way, developing countries determine the VAT efficiency and the amount of revenue that could be collected by indirect taxation. The article sums up works of different scientists, dealing with the impact of determinants on VAT efficiency. The subject of this paper is an analysis of the factors that influence the C efficiency ratio. The main objective of the paper is to analize the impact of the change in the standard rate on the ratio. Theoretical analyses of standard rates and other factors that have reflections on the VAT collection efficiency explicitly prove that there are different ways to improve the efficiency of VAT collection, and exclude an increase in the standard rate. An increase in the standard rate provides a balance of negative effects, which can be blurred by recorded tax revenues. We focused on the countries of the European Union: Bulgaria, Czech Republic, Estonia, Greece, Croatia, Latvia, Hungary, Poland, Romania, Slovakia, Slovenia, Lithuania during the 2000-2016 period. These countries experienced significant changes in government during economic transformation, and where VAT is the main source of public revenues. The last section analize an increse in VAT rate and C efficiency ratio in Serbia and conteins conclusions. The paper indicates the imperfection of inadequately defined VAT rates on economic growth and development in analized countries. Based on analyses we can conclude that the increase in the standard rate have negative reflections on the VAT efficiency, and that it was one of the factors of the continuous decline in C-efficiency.

Keywords



Full Text


References


Aizenman J. & Jinjarak Y. (2005). The Collection Efficiency of the Value Added Tax: Theory and International Evidence, NBER Working Paper No. 11539, National Bureau of Economic Research. doi: 10.3386/w11539.

Antić, D. (2014). Efficiency of a single-rate and broad-based VAT system: the case of Bosnia and Herzegovina. Financial Theory and Practice, 38(3), 303-335.

Avalara VATlive, International VAT and GST rates, 2018. http://www.vatlive.com/vat-rates/international-vat-and-gst-rates/.

Bikas, E. & Andruskaite E. (2013). Factors affecting Value Added Tax Revenue. European Scientific Journal, European Scientific Institute.

Bikas, E., Rashkauskas, J. (2011). Value added tax dimension: The case of Lithuania, EKONOMIKA, Vol. 90, No. 1, pp. 22-38.

Bogetic, Ž. & Hassan, F. (1993). Determinants of value - added tax revenue: a cross section analysis. Policy, Research working papers No. WPS 1203. Country operations. Washington: The World Bank.

Đorđević, M. (2014). (Im)Possibilities of revenue increase from consumption taxes in the tax sistem of Serbia. Themes - Journal for social sciences. 3 (2014), 1155-1171.

Đurović-Todorović, J. & Đorđević, M. (2013). Porezi na potrošnju, Niš: Ekonomski fakultet.

Ebrill, L., Keen, M. & Perry, V. (2001). The Modern VAT. Washington: International Monetary Fund.

Ebrill, L., Keen, M., Bodin, J. P. & Summers, V. (2002). The Allure of the Value-Added Tax, Finance & Development, A quarterly magazine of the IMF, 39(2).

Grandcolas, Ch. (2005). The Occasional Failure in VAT Implementation: Lessons for the Pacific. Asia-Pacific Tax Bulletin. http://unpan1.un.org/intradoc/groups/public/documents/unpan/unpan019991.pdf.

Grgić, R. & Terzić, S. (2014). Tax evasion in Bosnia and Hercegovina and business environment. Procidia-Social and Behavioral Sciences, 119 (2014), 957-966.

Hybka, М.М. (2009). VAT Collection Efficiency in Poland before and after Accession to the European Union-a, 1392-1258. Ekonomika, Society of Economists "Ekonomika" Niš, 85(2009) 7-18.

Janković-Milić, V. & Đurović-Todorović, J. (2017). Regressivity of Value Added Tax in the European Union and the Republic of Serbia. Improving micro and macro competitiveness-problems and possible solutions (267-285). Niš: Faculty of economics.

Keen, M. & Lockwood B. (2006). Is the VAT a Money Machine?. National Tax Journal, 59(4), 905-28.

Keen, M. (2007). VAT Attacks!, IMF Working Papir!, WP/07/142. Washington: International Monetary Fund.

Keen, M. (2013). The Anatomy of VAT. IMF Working Papir WP/13/111. Washington: Internatinal Monetary Fund.

Law on Amendments and Supplements to the Law on Value Added Tax, Official Gazette of RS, no. 93/2012.

Legeida, N. & Sologoub, D. (2003). Modeling Value Added Tax (VAT) Revenues in a Transition Economy: Case of Ukraine, 1-21. Institute for economic research and policy consulting working paper No. 22.

Ministry of Finance RS, Bullitin of Public Finance. No. 156 (2017).

National Bank of RS, Basic macroeconomic indicators (2017). https://www.nbs.rs/internet/cirilica/80/index.

Owens, J. (2011). Improving performance of VAT system is a priority in the context of the economic crisis. World Commerce Review, 5(3), 8-10.

Široký, J. & Kovářová, A. (2010), The Causes of Changes in the Rates of Value Added Tax in the Czech Republic and their Possible Impacts. Acta všfs, 4(2), 121-134.

Smith, A., Islam, A. & Moniruzzaman M. (2011). Consumption Taxes in Developing Countries – The Case of the Bangladesh VAT, Working Paper Series, Working Paper No. 82.

Taxation and customs union, Taxation Trends in European Union, 2017, Statistical books. Eurostat: European Commission: European Union. Accesible at: https://ec.europa.eu/taxation_customs/sites/taxation/files/taxation_trends_report_2017.pdf.

The Republic Institute for Statistics, Use of the gross domestic product of the Republic of Serbia, 1995-2016. http://www.stat.gov.rs/WebSite/Public/PageView.aspx?pKey=62.

Ueda, J. (2017). The Evolution of Potential VAT Revenues and C-Efficiency in Advanced Economies. IMF Working Paper WP/17/158. Washington: International Monetary Fund.




.