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VAT Evasion in Bulgaria: A General-Equilibrium Approach

Aleksandar Vasilev

Bulgarian Economic Papers (www.bep.bg) from St Kliment Ohridski University of Sofia, Faculty of Economics and Business Administration / Center for Economic Theories and Policies

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 non-di erentiated 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 one-fourth of output, an estimate which is in line with the gures 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)
New Economics Papers: this item is included in nep-cmp, nep-eec, nep-iue, nep-law and nep-mac
Date: 2016-10, Revised 2016-10
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Citations: View citations in EconPapers (22) Track citations by RSS feed

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https://www.uni-sofia.bg/index.php/eng/content/dow ... file/BEP-2016-09.pdf First version, 2016 (application/pdf)

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