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FISCAL RISK OF VAT UNCOLLECTED IN EUROPEAN UNION

Porumboiu Adriana Elena (), Butu Ionela (), Ghetu Raluca () and Petre Brezeanu ()
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Porumboiu Adriana Elena: Doctoral School of Finance, Bucharest University of Economic Studies, Bucharest, Romania
Butu Ionela: Doctoral School of Finance, Bucharest University of Economic Studies, Bucharest, Romania
Ghetu Raluca: Doctoral School of Finance, Bucharest University of Economic Studies, Bucharest, Romania

Annals of Faculty of Economics, 2019, vol. 1, issue 2, 200-207

Abstract: Since 1967, the 6 states that then formed the European Economic Community (EEC) decided that value added tax (VAT) would be the most important indirect tax of the Member States. Moreover, its use by the countries wishing to join the EEC was an indispensable condition. In 2019, VAT is a tax used by all 28 European Union (EU) Member States, but the system for collecting public revenues from this tax is not a perfect one and it can be improved. EU intervention in the area of taxation is limited because the fiscal policy of each Member State continues to be an attribute of national sovereignty. Through the directives, the European Commission sets measures valid for all countries (such as the minimum level of the standard VAT rate set at 15%), but each EU state decides on the national system of taxes and duties. The fiscal policy registers differences from one state to another and therefore provides different results in terms of performance. This article aims to highlight the link between the VAT collection deficit and the standard VAT rate applied in each of the EU countries. The analysis showed that the countries with the lowest VAT rates are also the ones with the lowest losses in VAT collection. The biggest deficits are encountered among the states with average VAT rates, especially in the east and south of the EU. Romania and Greece lose about a third of the VAT revenues, and the loss is all the more obvious as the share of VAT in the total tax receipts is higher than in Western EU states, for instace. After all, any loss harms the tax system and indirectly the society. We also mention that the data used in this analysis are those published in September 2019 by the European Commission through TAXUD and also provided by Eurostat databases and refer to 2017.

Keywords: value-added tax; VAT Gap; VAT revenue; standard VAT rate (search for similar items in EconPapers)
JEL-codes: H26 H71 (search for similar items in EconPapers)
Date: 2019
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