VAT Evasion in Bulgaria: A General-Equilibrium Approach

Vasilev, Aleksandar (2017) VAT Evasion in Bulgaria: A General-Equilibrium Approach. Review of Economics and Institutions, 8 (2). p. 17. ISSN 2038-1379

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VAT Evasion in Bulgaria: A General-Equilibrium Approach
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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 nondifferentiated 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 figures 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
Subjects:N Business and Administrative studies > N330 Taxation
Divisions:Lincoln International Business School
ID Code:33271
Deposited On:22 Oct 2018 13:51

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