Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/170566 
Year of Publication: 
2017
Citation: 
[Journal:] Review of Economics and Institutions [ISSN:] 2038-1379 [Volume:] 8 [Issue:] 2 [Publisher:] University of Perugia Electronic Press [Place:] Perugia [Year:] 2017 [Pages:] 1-17
Publisher: 
University of Perugia Electronic Press, Perugia
Abstract: 
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 non-di fferentiated 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.
Subjects: 
VAT evasion
general equilibrium
Bulgaria
JEL: 
D58
E26
H26
K42
Published Version’s DOI: 
Document Type: 
Article
Document Version: 
Manuscript Version (Preprint)
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