MEASURING VAT EFFICIENCY IN VISEGRAD GROUP COUNTRIES

Abstract

Value added tax represents one of the main tax forms, because it generates the most revenue and greatly contributes to the budgets of many countries. The purpose of this paper is to determine the VAT efficiency level in Visegrad Group countries (Czechia, Hungary, Poland and Slovakia) for the period between 1995 and 2020. The average VAT efficiency in the Visegrad region was 0.51, and this indicator improved after these economies joined the European Union. The results of this empirical research show that gross domestic product per capita, final consumption and value added tax revenue have a positive impact on VAT efficiency, as measured by the C-efficiency indicator. On the other hand, the results demonstrate that an increase in VAT rate lead to a lower level of VAT efficiency in the examined countries. Finally, the EU accession of the Visegrad region had positive implications for the productivity and efficiency of their VAT systems. The results of this study suggest that the governments of the Visegrad Group countries should focus on increasing the GDP per capita growth rate and final consumption to stimulate VAT revenue. Additionally, the policymakers of these countries can increase VAT revenue by expanding the tax base in order to avoid the negative effect that increasing the standard VAT rate has on VAT efficiency.