## The Efficiency of VAT Implementation: A Comparative Study of Central and Eastern European Countries in Transition

_IMF Working Papers, July 1, 1996_

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## Bibliographic details
- Authors: William Jack
- Published: July 1, 1996
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451955828.001

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### Summary
- Paper presents calculations of the efficiency with which value-added taxes (VAT) are collected in five transition economies in Central and Eastern Europe.
- Compares actual VAT revenues in 1994 with hypothetical revenues that would have resulted if the statutory VAT rates had been applied without any revenue leakage.
- The five countries fall into two broad groups:
  - one exhibiting relatively high collection efficiency, and
  - the other relatively low efficiency.
- Lack of detailed information on tax rules and consumption patterns limits definitive conclusions.
- The impact of exemptions is shown to likely strengthen the comparative results.

### Methodology
- Core comparison: actual VAT revenues in 1994 versus counterfactual revenues under full application of statutory VAT rates (i.e., no revenue leakage).
- Analysis relies on available information on statutory VAT rates, observed revenues, and available consumption data; gaps in detailed tax-rule and consumption-pattern data are acknowledged.

### Key Findings and Results
- Number of countries analyzed: 5.
- Year of revenue data compared: 1994.
- Countries segregate into two groups by collection efficiency:
  - Group A: relatively high collection efficiency.
  - Group B: relatively low collection efficiency.
- Exemptions likely play a material role in reinforcing the comparative efficiency outcomes.

### Policy-relevant implications
- Measurement of VAT collection efficiency using the gap between actual revenues and counterfactual full-rate revenues can identify relative performance across transition economies.
- Detailed information on tax rules and household consumption patterns is important for definitive assessment of VAT efficiency.
- Consideration of the role and scope of exemptions is necessary when interpreting cross-country VAT efficiency comparisons.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/the-efficiency-of-vat-implementation-a-comparative-study-of-central-and-eastern-european-1940_