Economics at your fingertips  

Alternative method to measure the VAT gap in the EU: Stochastic tax frontier model approach

Danuse Nerudova and Marian Dobranschi

PLOS ONE, 2019, vol. 14, issue 1, 1-38

Abstract: In this paper, we pursue an alternative method to measure the Value Added Tax gap in the European Union using the stochastic tax frontier model. We use the Value Added Tax total tax liability as the input to estimate the optimal frontier of the Value Added Tax, as well as to predict technical inefficiency. Using the latest innovations of the stochastic frontier approach, we aim to obtain the accurate size of the Value Added Tax gap in the EU-26 countries and contrast them with extant estimates. The obtained estimates of the Value Added Tax gap using the stochastic tax frontier model are different from the estimates produced by the top-down method to calculate the Value Added Tax gap in the EU. Moreover, the stochastic tax frontier approach allows us to disentangle the Value Added Tax gap, which is time dependent, from the persistent Value Added Tax gap, which is country specific. The stochastic tax frontier model allows us to test the effect of exogenous factors on the technical inefficiency of the Value Added Tax and propose appropriate policy recommendations.

Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link) (text/html) ... 11317&type=printable (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1371/journal.pone.0211317

Access Statistics for this article

More articles in PLOS ONE from Public Library of Science
Bibliographic data for series maintained by plosone ().

Page updated 2020-11-07
Handle: RePEc:plo:pone00:0211317