Abstract

THE DETERMINANTS OF VAT REVENUE EFFICIENCY: RECENT EVIDENCE FROM GREECE

Athanasios O. Tagkalakis

Bank of Greece

Abstract

This paper examines the relationship between VAT revenue and economic activity in Greece by estimating the relationship between tax revenue efficiency and real GDP growth rate. We find a positive and significant relationship between these variables, and show that the responsiveness of tax revenue efficiency to economic activity fluctuations has increased in the recent years. Tax efficiency is affected by changes in the ability to curb tax evasion.

JEL classification: C32; E32; H20; O52

Keywords: VAT; GDP; tax evasion; Greece.

Acknowledgements: I would like to thank Jim Alm, Heather Gibson, George Hondroyiannis, Dimitris Malliaropulos and Basil Manesiotis for their very helpful comments. The views of the paper are my own and do not necessarily reflect those of the Bank of Greece. All remaining errors are mine.

Correspondence:

Athanasios O. Tagkalakis

Economic Research Department, Bank of Greece,

21 El. Venizelos Av. 10250 Athens, Greece

Email: atagkalakis@bankofgreece.gr

Tel.:0030-210-3202442