Search

Begin New Search Topic Tax Systems Political Geography Europe Content Type Special Report Publishing Institution Center for Social and Economic Research - CASE Publication Year within 10 Years

1. Study and Reports on the VAT Gap in the EU-28 Member States: 2019 Final Report

Author:
Adam Śmietanka, Alejandro Esteller Moré, Grzegorz Poniatowski, José María Durán-Cabré, and Mikhail Bonch-Osmolovsky
Publication Date:
10-2019
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
This Report has been prepared for the European Commission, DG TAXUD under contract TAXUD/2017/DE/329, “Study and Reports on the VAT Gap in the EU-28 Member States” and serves as a follow-up to the six reports published between 2013 and 2018. This Study contains new estimates of the Value Added Tax (VAT) Gap for 2017, as well as updated estimates for 2013-2016. As a novelty in this series of reports, so called “fast VAT Gap estimates” are also presented the year immediately preceding the analysis, namely for 2018. In addition, the study reports the results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). It also scrutinises the Policy Gap in 2017 as well as the contribution that reduced rates and exemptions made to the theoretical VAT revenue losses. In 2017, growth in the European Union (EU) continued to accelerate with a combined real GDP growth of 2.5 percent, providing a sound environment for an increase in VAT collections. As a result, VAT revenue increased in all Member States (MS). An increase in the base was the main, but not the only, source for growth. Increase in compliance contributed to an approximate 1.1% increase in VAT revenue. In nominal terms, in 2017, the VAT Gap in EU-28 MS fell to EUR 137.5 billion, down from EUR 145.4 billion. In relative terms, the VAT Gap share of the VAT total tax liability (VTTL) dropped to 11.2 percent in 2017 and is the lowest value in the analysed period of 2013-2017. Fast estimates for 2018 indicate that the downward trend will continue and that VAT Gap will likely fall below EUR 130 billion in 2018. Of the EU-28, the VAT Gap as percentage of the VTTL decreased in 25 countries and increased in three. The biggest declines in the VAT Gap occurred in Malta, Poland, and Cyprus. The smallest Gaps were observed in Cyprus (0.6 percent), Luxembourg (0.7 percent), and Sweden (1.5 percent). The largest Gaps were registered in Romania (35.5 percent), Greece (33.6 percent), and Lithuania (25.3 percent). Overall, half of EU-28 MS recorded a Gap above 10.1 percent (see Figure 2.2 and Table 2.1). The Policy Gaps and its components remained stable. The average Policy Gap level was 44.5 percent, out of which 9.6 percentage points are due to the application of various reduced and super-reduced rates instead of standard rates (the Rate Gap). The countries with the most flat levels of rates in the EU, according to the Rate Gap, are Denmark (0.8 percent) and Estonia (3 percent). On the other side of spectrum are Cyprus (29.6 percent), Malta (16.5 percent), and Poland (14.6 percent). The Exemption Gap, or the average share of Ideal Revenue lost due to various exemptions, is, on average, 35 percent in the EU, whereas the Actionable Policy Gap – a combination of the Rate Gap and the Actionable Exemption Gap – is, on average, 13 percent of the Notional Ideal Revenue. The econometric analysis repeated after the 2017 Study confirmed the earlier results. We observe that the dispersion of tax rates and unemployment rate have a positive impact on the VAT Gap. Regarding the variables in hands of the administration, on the extended times series compared to the previous year, our results suggest that the nature of the expenditure of the administration, in particular IT expenditure, is more important that the amount of the overall resources.
Topic:
Economy, Economic Growth, Tax Systems, and Fiscal Policy
Political Geography:
Europe, Poland, and European Union

2. EU28 legal and fiscal readiness for the adoption of an on-tax financing mechanism - EuroPACE

Author:
Izabela Styczynska and Karolina Zubel
Publication Date:
08-2019
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
EuroPACE is an innovative financial mechanism inspired by an American building improvement initiative called Property Assessed Clean Energy (PACE). The innovative character of the EuroPACE mechanism is that financing through EuroPACE is linked to the taxes paid on a property. In other words, the financing lent by a private investor is repaid through property taxes and other charges related to the buildings. EuroPACE is therefore in line with the EC’s objectives of (1) putting EE first, (2) contributing to the EU’s global leadership, and (3) empowering consumers to enable MS to reach their energy and climate targets for 2030. Last but not least, EuroPACE could contribute to the democratisation of the energy supply by offering cash-flow positive, decentralised EE solutions. The EuroPACE mechanism engages several stakeholders in the process: local government, investors, equipment installers, and homeowners. To establish the EuroPACE programme, several conditions must be satisfied, each of which are relevant for different stakeholder at different stages of the implementation. For the purpose of this report, we divided these criteria into two categories: key criteria, which make the implementation possible, and complementary criteria, which make the implementation easier. For the time being, it is a pure hypothesis to be tested with potential EuroPACE implementation. One ought to remember that residential on-tax financing is a concept in its infancy in the EU. Therefore, the methodology to evaluate the readiness of a country to implement on-tax financing is complex and consists of six stages:Identification of fiscal and regulatory conditions; Data collection; Weighting; Grading; Country SWOT analysis; Qualitative assessment.
Topic:
Climate Change, Energy Policy, Economy, Tax Systems, and Innovation
Political Geography:
Europe, Poland, and European Union

3. Why do we need self-employed persons? Some economic reflections, mainly tax related ones

Author:
Adam Adamczyk, Leszek Morawski, and Jarek Neneman
Publication Date:
05-2019
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
For many years, we have been hearing about the need for innovation and entrepreneurship. Successive Polish government declare their support for entrepreneurs and expand the catalog of privileges, mainly related to taxes and mandatory contributions. Not infrequently, in these discussions the self-employed are equated with entrepreneurs. In this work, we will seek an answer to the questions: Who, then, are the self-employed? Are they really entrepreneurs? Should we support their activities? And finally the fundamental question: What does the economy get from the self-employed? In this work we point out that the differences in rates of self-employment between countries may result from differences in taxation on the labor provided by self-employed and salaried workers. In the main part of the work, taking advantage of the potential of the EUROMOD tax-benefit microsimulation model, we show that in Europe there is no single model of taxation of work conducted as one’s own business. In the majority of the tax-contribution systems we examined, the profitability of employment or self-employment changes along with changes in income. In light of the regressivity of the burdens on the self-employed, as a rule it begins to be profitable only above a certain income level. In the first part of the work we define the self-employed as those who run a business, and later we distinguish within this group entrepreneurs, meaning those who take on risk and create innovations. Discussing the advantages and disadvantages of self-employment from the point of view of the self employed and the employer, we point out that the benefits – including systemic (tax and contribution) benefits, outweigh the disadvantages. We also discuss in more detail the imposition of income tax on the self-employed. In the second part we present changes in the value of self-employment over the last 25 years. Here we use data from the World Bank and certain data points from the European Union Statistics on Income and Living Conditions (EU-SILC). They allow us to observe how the relationship between the self-employed and the economy is changing: The significance of services provided for other businesses is growing. Additionally, we can see that the significance of self-employment is falling. In Poland the level of (non-agricultural) self-employment is low. The dynamics of the rate of self employment indicate that the influence of legal regulations on the scale of self-employment is secondary. It seems that in this case, technological and demographic factors are much more significant.
Topic:
Demographics, Labor Issues, Employment, Business, Social Policy, Tax Systems, and Fiscal Policy
Political Geography:
Europe and Poland

4. Study and Reports on the VAT Gap in the EU-28 Member States: 2018 Final Report

Author:
Adam Śmietanka, Alejandro Esteller Moré, Grzegorz Poniatowski, José María Durán-Cabré, and Mikhail Bonch-Osmolovsky
Publication Date:
10-2018
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
In this Report, the Authors present the new Value Added Tax (VAT) Gap estimates for 2016, as well as updated estimates for 2012-2016. In addition to the analysis of the Compliance Gap, this Report examines the Policy Gap in 2016 as well as the contribution that reduced rates and exemptions made to the theoretical VAT revenue losses. Moreover, the Report contains an econometric analysis of VAT Gap determinants, which is a novelty introduced from this year’s Study. In 2016, most European Union (EU) Member States (MS) saw positive tailwinds with a combined real GDP growth of 2.0 percent. As a result of a growing base and increasing VAT compliance, VAT revenue increased in all MS with three exceptions. Most pronounced is the case of Romania, where VAT revenue decreased in response to reduction of the standard rate by four percentage points. In nominal terms, in 2016, the VAT Gap in EU-28 MS fell below EUR 150 billion and amounted to EUR 147.1 billion. In relative terms, the VAT Gap share of the VAT total tax liability (VTTL) dropped to 12.3 percent from 13.2 percent in 2015, and is the lowest value in the analysed period of 2012-2016. Denoted at the share of GDP, the VAT Gap in 2016 amounted to 0.99% compared to 1.05% in 2015. Of the EU-28, the VAT Gap share decreased in 22 countries and increased in six—namely, Romania, Finland, the UK, Ireland, Estonia, and France. The biggest declines in the VAT Gap—of over five percentage points—occurred in Bulgaria, Latvia, Cyprus, and the Netherlands. The smallest Gaps were observed in Luxembourg (0.85 percent), Sweden (1.08 percent), and Croatia (1.15 percent). The largest Gaps were registered in Romania (35.88 percent), Greece (29.22 percent), and Italy (25.90 percent). Overall, half of EU-28 MS recorded a Gap below 9.9 percent. The Policy Gaps and its components remained stable. The average Policy Gap level was 44.8 percent, out of which 9.95 percentage points are due to the application of various reduced and super-reduced rates (the Rate Gap). Countries with the most flat levels of rates in the EU, according to the Rate Gap, are Denmark (0.93 percent) and Estonia (2.97 percent). The Exemption Gap, or the average share of Ideal Revenue lost due to various exemptions, is, on average, 35 percent in the EU, whereas the Actionable Policy Gap—a combination of the Rate Gap and the Actionable Exemption Gap—is, on average, 16.5 percent of the Notional Ideal Revenue. The econometric analysis can be considered a successful first attempt at inferring the impact of various determinants. Firstly, it can be observed that the productive structure of the economy exerts an impact on the VAT Gap. The share of retailers has the strongest impact on the VAT Gap; however, telecommunications, industry, and art also have a positive impact. Secondly, liquidity constraints and the productive structure of the economy also play a role in determining VAT compliance. The most interesting results have to do with the impact of the variables under the direct control of the tax administration. We show that the impact of the size of the tax administration and the VAT Gap is concave. On the contrary, in the case of IT expenditure, the impact is convex, albeit small, until productivity vanishes when IT expenditure is about 9.8 percent of the total expenditure of the tax administration.
Topic:
Financial Crimes, Tax Systems, Fiscal Policy, and VAT
Political Geography:
Europe, Poland, and European Union

5. Study and Reports on the VAT Gap in the EU-28 Member States: 2017 Final Report

Author:
Grzegorz Poniatowski, Mikhail Bonch-Osmolovsky, and Misha V. Belkindas
Publication Date:
10-2017
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
CASE prepared a new study for the European Commission on the VAT Gap in the European Union in 2015. The figures offer an important snapshot of the problems of collecting VAT in the EU and what needs to be done to improve revenues and fight tax fraud. During 2015, the overall VAT that should have been collected in EU Member States grew by about 4.2 %, while collected VAT revenues rose by 5.8 %. As a result, the overall VAT Gap in the EU Member States decreased by about €8.7 billion in absolute terms, down to €151.5 billion. As a percentage, the overall VAT Gap decreased by 2.1 % to 12.7 %. In 2015, the highest VAT Gap was recorded in Romania with a figure of 37.18 %. In absolute terms, the highest VAT Gap of €35 billion was in Italy. Overall, the VAT Gap decreased in most Member States, with the largest improvements noted in Malta, Romania and Spain. The VAT Gap measured in this study includes for the first time revenues emerging from new VAT rules for cross-border sales of e-services which came into force on 1 January 2015, following a Commission proposal. CASE's team was led by Grzegorz Poniatowski, Director of Fiscal Policy Studies, and composed of Mikhail Bonch-Osmolovskiy and Misha Belkindas.
Topic:
European Union, Tax Systems, Fiscal Policy, and VAT
Political Geography:
Europe, Poland, and European Union

6. Mutual Learning for Reducing Tax Gaps in V4 Countries and Ukraine Peer Country Paper: Poland

Author:
Iakov Frizis, Krzysztof Głowacki, and Katarzyna Mirecka
Publication Date:
08-2017
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
Tax administration has been improving in Poland in recent years. The country moved from a ranking of 128 to a ranking of 47 in the Paying Taxes indicator of the World Bank’s Doing Business report between its 2012 and 2017 editions. However, compliance with taxes still requires 271 man hours, compared to the European Union (EU) & European Free Trade Association (EFTA) average of 173 man-hours and to the top Central and Eastern Europe (CEE) performer Estonia’s 81 man-hours. Polish tax legislation has been described as complex by some observers and not overly complex by other observers, while many emphasise that it is improving at a good pace. The paper summarizes knowledge on tax gaps in Poland with respect to PIT, CIT, VAT, and excise. An introduction to the Polish tax system is given, trends in tax collectability and estimates of the tax gaps are discussed, and methods of combating tax evasion and avoidance are reviewed. The paper has been written as part of the project “Mutual Learning for Reducing Tax Gaps in V4 Countries and Ukraine” co-financed by the Visegrad Fund in the years 2016-2017.
Topic:
Financial Crimes, Tax Systems, Free Trade, Fiscal Policy, and VAT
Political Geography:
Europe, Ukraine, Poland, and European Union

7. Mutual Learning for Reducing Tax Gaps in V4 Countries and Ukraine Final Report

Author:
Iakov Frizis and Krzysztof Głowacki
Publication Date:
08-2017
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
ax gaps, or the differences between tax amounts that are due by the taxpayers and the amounts that are actually collected by the state, remain a challenge for many European Union (EU) Member States, including for the V4 countries. Tax gaps also present a formidable challenge for Ukraine, which is currently reforming many aspects of its financial and legal systems. To help increase awareness about tax compliance and exchange knowledge on the state-of-the-art methods used to combat tax gaps, the project Mutual Learning for Reducing Tax Gaps in V4 Countries and Ukraine has been implemented. The paper is a summary of the exchange of knowledge and experience that took place in the course of the project co-financed by the Visegrad Fund in the years 2016–2017.
Topic:
Economics, Tax Systems, Fiscal Policy, and VAT
Political Geography:
Europe, Ukraine, Poland, and European Union

8. Social harmonization and labor market performance in Europe

Author:
Katarzyna Mirecka and Izabela Styczynska
Publication Date:
04-2017
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
The paper aims to assess the impact of selected elements of social harmonization on labor market performance in the European Union among two groups of workers—the total working population and the elderly. The aim is to examine whether upward changes in labor taxes affect employment, unemployment, and inactivity rates in the European Union. The descriptive empirical evidence shows that the level of labor taxation varies significantly across European countries and the introduced changes might affect national markets differently. The Arellano-Bond dynamic panel data regression shows that an increase in the tax wedge, as an element of a social harmonization process, has a very weak impact on labor market performance in the European Union. The impact is statistically significant and negative only for the elderly (i.e. the population aged 50+). Empirical analysis suggests that upward social convergence might negatively affect the employment of the most disfavored groups in the labor market, such as the elderly. It suggests that social harmonization focused on reducing the tax wedge would have favorable effects on labor market performance, especially among the most disadvantaged groups. This report was prepared within a research project entitled “SocialBoost – effective measures of social harmonization as a boost for employability in times of demographic changes”, which received funding under the Nordic Council of Ministers’ Programme for NGOs in the Baltic Sea Region.
Topic:
Demographics, Labor Issues, Social Policy, Tax Systems, and Social Security
Political Geography:
Europe and European Union

9. More for less: What tax system for Poland?

Author:
Stanisław Gomułka, Jarosław Neneman, and Michał Myck
Publication Date:
10-2017
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
What are the challenges facing Poland’s economy and tax system over the next 20 years? What does the optimal tax system mean? Do we have high taxes in Poland? The goal of the publication is to initiate a discussion on the subject of a tax system for Poland, presenting a framework within which the current system should be analyzed and conclusions drawn about what changes are needed over the longer term. Professor Stanisław Gomułka, chief economist of the Business Centre Club, analyzes the challenges facing Poland’s economy and tax system over the next 20 years. Jarosław Neneman, an assistant professor at Łazarski University, presents the basic parameters for a planned academic research project on how to use the Polish tax system effectively. Michał Myck, director and board member of CenEA (the Center for Economic Analysis) describes the optimal characteristics of a tax system according to theory and the results of scholarly research, which of course also relates to the Polish tax system.
Topic:
Economics, Finance, Tax Systems, and Fiscal Policy
Political Geography:
Europe, Poland, and European Union

10. How the European Commission and European countries fight VAT fraud

Author:
Kamil Olczykowski, Piotr Laskowski, Tomasz Kassel, and Tomasz Michalik
Publication Date:
06-2017
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
The VAT gap, both on the European Union scale and that of particular member states (though not all of them) appeals to the imagination and awakens many extreme emotions. For it is difficult to accept that the level is so significant, and – what is more – in recent years it has narrowed quite insignificantly despite attempts to limit it. In the popular understanding, this gap is quite often identified exclusively with the consequences of fraud, but it has many more component elements, many of which have nothing to do with abuse. Still, this doesn’t change the face that it is precisely fraud and abuse that constitute a particularly significant element of the VAT gap.
Topic:
Financial Crimes, Tax Systems, Fiscal Policy, and VAT
Political Geography:
Europe, Poland, and European Union