VAT Evasion in Bulgaria: A General-Equilibrium Approach

Aleksandar Vasilev

Review of Economics and Institutions, 2017, vol. 8, issue 2

Abstract: This paper utilizes an otherwise standard micro-founded general-equilibrium setup, which is augmented with a revenue-extraction mechanism to assess the magnitude of VAT evasion. The model is calibrated to Bulgaria after the introduction of the currency board (1999-2014), as one of the very few countries in Europe with a nondifferentiated consumption tax rate, and an economy where VAT revenue makes almost half of total government tax revenue. A computational experiment performed within this setup estimates that on average, the size of evaded VAT is a bit more than onefourth of output, an estimate which is in line with the figures provided in both Philip (2014) and the European Commission (2014). In addition, model-based simulations suggest that increases in spending on law and order could generate substantial welfare gains by decreasing VAT evasion.

Keywords: VAT evasion; general equilibrium; Bulgaria (search for similar items in EconPapers)
JEL-codes: D58 E26 H26 K42 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: VAT Evasion in Bulgaria: A General-Equilibrium Approach (2017)
Working Paper: VAT Evasion in Bulgaria: A General-Equilibrium Approach (2016)
Working Paper: VAT Evasion in Bulgaria: A General-Equilibrium Approach (2016)
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