Trends in income taxation: are taxes converging in Central and Eastern European countries?

Michał Bernardelli, Felis Paweł, Jamroży Marcin, Lipiec Jacek, Malinowska-Misiąg Elżbieta, Szlęzak-Matusewicz Joanna () and Otczyk Grzegorz
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Felis Paweł: SGH Warsaw School of Economics, Warsaw, Poland
Jamroży Marcin: SGH Warsaw School of Economics, Warsaw, Poland
Lipiec Jacek: SGH Warsaw School of Economics, Warsaw, Poland
Malinowska-Misiąg Elżbieta: SGH Warsaw School of Economics, Warsaw, Poland
Szlęzak-Matusewicz Joanna: SGH Warsaw School of Economics, Warsaw, Poland
Otczyk Grzegorz: SGH Warsaw School of Economics, Warsaw, Poland

International Journal of Management and Economics, 2023, vol. 59, issue 4, 349-370

Abstract: The paper examines the convergence of tax systems in Central and Eastern European countries (CEECs) over the period 1995–2018. Due to the increasing impact of tax competition, we have focused on income taxes, in particular, corporate ones. We have identified the factors that influence the taxation system and trends in income taxation in the CEECs by adapting the hidden Markov model approach. We find that many CEECs have reduced income taxation in the analysis period, mainly by lowering tax rates. Corporate income taxes have also decreased in many CEECs in the same period; however, the reverse has been observed too. Both convergence and divergence have been identified among the CEECs over the period considered. The speed of these processes based on the used variables varied depending on both exogenous and endogenous factors. These factors have been diagnosed as being specific to the periods of tax reforms, i.e., before and after accession to the European Union (EU) and the global financial crisis.

Keywords: income tax; tax competition; tax convergence (search for similar items in EconPapers)
JEL-codes: H2 O52 O57 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ijomae:v:59:y:2023:i:4:p:349-370:n:4

DOI: 10.2478/ijme-2023-0019

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