Abstract:

This paper analyzes the level of influence of the economic, fiscal and social factors on the Value Added Tax gap. VAT gap is the difference between the estimated VAT liability and the VAT actually paid in the state budget. This study focuses on the years between 2000 to 2015 and is based on a multiple Panel regression for 26 european countries. For the purpose of this paper 12 explanatory variables were used. Conclusions revealed increasing gap influences for the majority of the economic explanatory variables; however, variables such as the Corruption Perception Index revealed decreasing influences on the VAT gap. Moreover, a high level of VAT gap highlights a high tax evasion level and also the presence of activities linked to shadow economy, therefore better fiscal discipline and control are needed.