Measuring the sectoral VAT gap in Bulgaria: estimates and its drivers

Piotr Dybka, Stanisław Bartha, Anna Komisarska and Michał Kowalczuk

No 2026-118, KAE Working Papers from Warsaw School of Economics, Collegium of Economic Analysis

Abstract: The goal of this paper is to estimate the level and provide a sectoral decomposition of the VAT gap in Bulgaria based on the unique dataset provided by the National Revenue Agency in Bulgaria (NRA). We focus on the output VAT gap. Our potential VAT estimate takes into account the value of output VAT based on the estimate of sales. Our study also seeks potential macroeconomic factors that affect the VAT gap and obtained results indicate that a higher VAT gap can be associated with a larger share of micro enterprises, changes in the business cycle (i.e. increase in firm death rate and unemployment). Moreover, firms with higher shares of revenues from sales to government observe markedly lower output VAT gap. In Bulgaria, the largest share of the VAT gap in overall value of VAT is observed in the trade sector, followed by the information and communication sector and professional, scientific, and technical activities.

Keywords: Shadow economy; VAT gap; VAT; Tax gap (search for similar items in EconPapers)
JEL-codes: C51 E26 H21 H26 O17 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2026-01
New Economics Papers: this item is included in nep-acc, nep-iue and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:sgh:kaewps:2026118

DOI: 10.33119/kaewps2026118

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