Annals of the University of Oradea: Economic Science (Dec 2021)


  • Ionela BUTU,
  • Petre BREZEANU,
  • Adriana PORUMBOIU,
  • Sorina Emanuela ȘTEFONI

Journal volume & issue
Vol. 30, no. 2
pp. 250 – 259


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VAT evasion reduces significantly the budget revenues and is often approximated by way of VAT Gap, which refers to the difference between the total VAT that should have been collected according to the applicable VAT Law (VTTL) and VAT actually collected by public budgets. The phenomenon of VAT Gap, to a greater or lesser extent, is an acute problem in all countries of the European Union (Member States), regardless of their level of economic development. Over the past two decades, the volume of VAT evasion has had an alarmingly upward trend. Therefore, the VAT Gap should be placed in a broader context than the economic one, also taking into account economic structure, institutional variables, legal, ethical and other dimensions that affect the business environment, respectively the society. Moreover, according to the World Economic Outlook „Growth and Institutions” (2003) IMF report, the institutional factor, as a general and defining arrangement for any economic system, it is the primary 'responsibility' of gap development. The objective of this study is to analyse the strength and direction of the relationship between the VAT Gap and the following economic structure and institutional variables: Fiscal Freedom (FF), Government Effectiveness (GE), Human Development Index (HDI), Corruption Perceptions Index (CPI) and People at risk of poverty or social exclusion (AROPE). Our study is consolidated on a 2009 – 2018 database, for the EU-26 Member States, including United Kingdom, divided into four groups. Within the study, we developed a Spearman Correlation between VAT Gap and each variable, aiming to point up whether these variables have a strong positive or negative influence on the VAT Gap.