scholarly journals The EU self-surplus puzzle: an indication of VAT fraud?

2021 ◽  
Author(s):  
Martin T. Braml ◽  
Gabriel J. Felbermayr
Keyword(s):  
Large Fraction ◽  
Value Added ◽  
Eastern Enlargement ◽  
Trade Surplus ◽  
Random Measurement Error ◽  
Services Trade ◽  
Goods And Services ◽  
Systematic Biases ◽  
Pair Level ◽  
The Eu

AbstractThe world runs a trade surplus with itself: the reported values of exports exceed the reported values of imports. This is logically impossible but a well-known empirical fact. Less well-known is the fact that, in recent years, the EU has a trade surplus with itself that amounts to more than 80% of the global surplus. In this paper, we show that this EU self-surplus is worth a striking 307 billion Euro in 2018, equaling 1.9% of the Union’s GDP, which persists both in goods and services trade accounts. We further examine discrepancies in goods and services trade accounts at the country and country pair level. These are strongest between neighboring countries and exist for members of the Euro Area as well as non-members. Around the 2004 Eastern Enlargement, the EU self-surplus quadrupled. Our estimations suggest that Cyprus, Ireland, Luxembourg, and Sweden are EU Members with the most inaccurate statistical regimes. We observe systematic biases which unlikely root in random measurement error. By contrast, we suspect that a large fraction of the EU’s self-surplus puzzle seems related to fraud in value added tax (VAT). VAT exemptions for exporters provide strong incentives for the over-declaration of true export values. The resulting loss in tax income could amount to as much as 64 billion Euro per year.

OPTIONS FOR TAXING FINANCIAL SUPPLIES IN VALUE ADDED TAX: EU VAT AND AUSTRALIAN GST MODELS COMPARED

2009 ◽  
Vol 58 (4) ◽  
pp. 897-932 ◽  
Author(s):  
RITA DE LA FERIA ◽  
MICHAEL WALPOLE
Keyword(s):  
Financial Services ◽  
Type System ◽  
Value Added ◽  
Current Treatment ◽  
Type Model ◽  
Fee For Service ◽  
Credit System ◽  
Value Added Tax ◽  
Goods And Services ◽  
The Eu

AbstractThe taxation of financial services is one of the most vexing aspects of a Value Added Tax (VAT). Conceptually, VAT should apply to any fee for service but where financial services are concerned there is a difficulty in identifying the taxable amount, ie the value added by financial institutions. As a result, most jurisdictions, including the EU, simply exempt financial services from VAT. Treating financial services as exempt, however, gives rise to significant legal and economic distortions. Consequently, a few countries have in recent years attempted an alternative VAT approach to financial services. Amongst these is Australia, which in 2000 introduced a Goods and Services Tax (GST) with a ‘reduced input tax credit’ system. This paper compares the current treatment of financial supplies, under a VAT-type system, in the EU and in Australia. The aim is to ascertain whether the Australian GST treatment of financial services is, as commonly thought, superior to the EU one, and consequently, whether introducing an Australian-type model should constitute a policy consideration for the EU.

scholarly journals A regional assessment of trends in business development in Ukraine

2019 ◽  
pp. 112-119
Author(s):  
Iryna Nadtochii
Keyword(s):  
Economic Development ◽  
Positive Impact ◽  
Small And Medium Enterprises ◽  
Value Added ◽  
Business Development ◽  
Retail Trade ◽  
Association Agreement ◽  
Goods And Services ◽  
Medium Enterprises ◽  
The Eu

The purpose of the research. The purpose of the article is to assess regional trends in business development in Ukraine. Methodology. The theoretical and methodological basis of the study is the scientific works of scientists in the field of business development in Ukraine. To achieve this goal, the following research methods were used: PEST-analysis of the external environment of SME development in the regions; methods of statistical analysis – to assess changes in the dynamics of GRP for 2014–2018. Results. It is investigated that from 2016 until in Ukraine there was a certain economic recovery, which is confirmed by the growth of consumption and income, as well as the growth of consumer lending and remittances. But in 2018, there was a decrease in exports and imports of goods and services. Exports decreased by 2.8 % of GDP, and imports by 1.9 % of GDP compared to the previous 2017 year. The decline in exports is due to weakening external demand for domestic goods and services. Despite some difficulties, a number of reforms have been implemented in Ukraine, which has had a positive impact on the economic situation. Reforms in Ukraine are supported by the international community. In 2018, the IMF provided Ukraine with a reserve loan for a period of 14 months in the amount of 3.9 billion USD. Ukraine received 4.4 billion USD in EU macro-financial assistance US and a loan of 349 million EUR under the World Bank Guarantee to ensure economic development. After the crisis of the economy in 2014, Ukraine managed to restore macroeconomic stability by adhering to flexible exchange rate limits, tight fiscal policy, financial and energy reforms. The signing of the Association Agreement with the EU in 2014 on the establishment of a Deep and Comprehensive Free Trade Area with the EU had a positive impact on Ukraine’s economy. It is investigated that in 2018 the share of micro, small and medium enterprises (SMEs) in Ukraine was over 90 % of the total number of enterprises. SMEs provided more than 60 % of jobs and almost 50 % of value-added in the business sector. More than 50 % of the SME structure is concentrated in wholesale and retail trade. The downside is the fact that most SMEs are concentrated in a low value-added sector of the economy. However, the share of SMEs engaged in IT technologies has been growing rapidly over the last five years. Wholesale and retail trade have the largest share (43.1 %) in the structure of small and medium enterprises in the Odessa region. Practical meaning. The results of the analysis will allow the authorities of the country and its individual territories to develop the necessary measures to improve business conditions, improve living standards and ensure the effectiveness of economic development of the territory. Prospects for further research. Development of an economic mechanism for the transformation of business processes in the system of competitive development of territories.

scholarly journals Trade in Services in the European Union

2020 ◽  
Vol 1 (14) ◽  
pp. 156-171
Author(s):  
Ines Kersan Skabic
Keyword(s):  
Foreign Trade ◽  
Value Added ◽  
Secondary Data ◽  
Developed Countries ◽  
The European Union ◽  
Trade In Services ◽  
Trade Expansion ◽  
Services Trade ◽  
Member States ◽  
The Eu

Services dominate in creation of value added in national economies, especially in developed countries and they have growing trend in developing (emerging) economies. They cover four modes of trade (according to GATS), that makes their calculation complex and a part of services is hidden in the value of production/trade of manufactured goods. Their importance in foreign trade, despite the increasing trend, is still three times smaller that the value of trade in goods, but also it is under-valuated. This paper explains specific characteristics of services foreign trade, provides analysis of structure of services trade but also pointed the limitation of wider trade expansion (i.e. liberalization of trade). The analysis employ statistical tools and secondary data and covers the EU member states. The EU is very important player in the global arena and it is net exporter of services, where richer member states are oriented to the other business sector while the Central, East and South members are focused to travel. The EU members mainly traded between them selves. Services trade faced higher barriers in cross-border trade. OECD measures these restriction by Services Trade Restrictiveness Index. EU common market provides better condition for the intra- EEA trade in services even the protection differs between countries and it is more liberal for computer and telecom sectors while in accounting services and legal services the protection is high due to national legislations.

scholarly journals The C-inefficiency of the EU-VAT and what can be done about it

2021 ◽  
Author(s):  
Sijbren Cnossen
Keyword(s):  
European Union ◽  
Union Member ◽  
Value Added ◽  
Member States ◽  
Goods And Services ◽  
Administrative Capacity ◽  
A Value ◽  
The Common ◽  
European Union Member States ◽  
The Eu

AbstractIt is widely agreed that in countries without major constraints on administrative capacity, a value-added tax (VAT) should tax all goods and services at a uniform rate. In these countries, VAT’s C-efficiency, that is, actual revenue over potential revenue, should be one if compliance is perfect. Under this approach, VAT’s C-inefficiency—the aggregate of the policy gap (exemptions, reduced rates, thresholds) and the compliance gap (revenue shortfalls due to laps in compliance and implementation)—is treated as a residual. This contribution shows that calculating VAT’s C-inefficiency independently of its C-efficiency produces a more telling benchmark, particularly of the policy gap. This is illustrated by an analysis of the revenues of the Dutch VAT, which, given the common VAT directive, should be representative of the VATs in other European Union Member States. The large policy gap, hovering around 0.50, forms the background for exploring three options to improve VAT’s performance: reforming the common directive, ceding VAT design to Member States, and introducing a common modern VAT which can be piggybacked by Member States.

Contradictions and problems of harmonization of value added tax rates in the EU

2021 ◽  
Vol 2021 (3) ◽  
pp. 23-45
Author(s):  
Alla SOKOLOVSKA ◽  
Keyword(s):  
Modern Science ◽  
Value Added ◽  
Tax Rates ◽  
Minimum Level ◽  
Member States ◽  
Eu Member States ◽  
Goods And Services ◽  
Harmonization Process ◽  
Reduced Rate ◽  
The Eu

Despite the fact that today VAT is considered the most harmonized tax, the process of approximation of its various elements occurs at different pace and with different efficiency. Some of the most problematic in this context are such elements of the tax as rates and benefits. The purpose of this article is to analyze the contradictory process of harmonization of standard and preferential tax rates, the current level and prospects of their approximation. In the article the evolution of the harmonization process of standard and reduced VAT rates in the EU and the current state of their approximation is analyzed. It has been established that currently the structure of preferential tax rates is the least harmonized. Countries vary both by their number and size, with five EU countries continuing to use a third preferential rate below its minimum level determined by the directive, while a country like Luxembourg imposes a 3% rate on 14 categories of goods and services. The scope of application of preferential rates also differs significantly in different countries. If in Bulgaria only the supply of hotel accommodation services is taxed at a reduced rate, in many member states – 16-18 categories of goods and services. The analysis has shown that the most harmonized are the standard VAT rates of the EU member states, and the degree of their harmonization is characterized by a tendency to increase, as evidenced by the decrease in their coefficient of variation during 1994-2020. It was determined that their convergence took place under the influence of two processes – the introduction of the minimum level of the standard rate by the integration law norms and the natural convergence of these rates, which resulted in finding solutions to common problems for most Member States related to overcoming global economic crises and ensuring sustainable economic growth, one of the tax instruments which modern science considers is the transfer of the tax burden from income to consumption, which encourages an increase in standard VAT rates in countries with their initially low levels. It is concluded that in the future, providing more freedom for Member States to set VAT rates will be linked to the introduction of a definitive VAT system, which provides tax collection according to the principle of the country of destination and imposes less requirements on the harmonization of its rates.

scholarly journals Slowing Economic Growth and Falling Production in EU

2021 ◽  
Vol 105 (5) ◽  
pp. 113-125
Author(s):  
Anatoliy Bazhan ◽  
Keyword(s):  
Economic Growth ◽  
Economic Policy ◽  
Clean Energy ◽  
Production Costs ◽  
Production Volume ◽  
Trade Surplus ◽  
Goods And Services ◽  
General Demand ◽  
Economic Growth Rates ◽  
The Eu

The author examines the problems of economic growth of the EU in the period before the coronavirus pandemic, as well as during the 2020 economic crisis and gradual recovery. It is argued that the decrease in 2017‒2019 was caused by a number of long-term reasons, i.e. slow technological renewal of production base and narrowing of trade surplus due to loss of competitive advantages over producers from Southeast Asia. The author analyses the mechanics of pandemic’s impact on EU production volume, caused by decline in general demand and supply of goods and services. The EU economic policy is viewed as an appropriate instrument to protect citizens and companies from bankruptcy. It is outlined that the recovery will stem not from the economic policy, but from countering the pandemic with vaccines and sanitary restrictions. The author forecasts that economic growth rates in the region will slow down due to the reasons that emerged before the pandemic. Moreover, the growth will be negatively affected by the current EU policy of greater use of clean energy and technologies that preserve the environment, but inflate the production costs.

Germany may raise spending to reduce imbalances

2017 ◽  
Keyword(s):  
Political Economy ◽  
Euro Area ◽  
Negative Effects ◽  
Trade Surplus ◽  
Content Type ◽  
Goods And Services ◽  
Balanced Budget ◽  
German Investment ◽  
The Eu ◽  
Do So

Subject Germany’s chronic trade surplus. Significance Germany’s trade surplus rose to 14.7% of GDP in May, Eurostat estimates released on July 14 show -- by far the highest in the EU. Reducing the negative effects of this and related imbalances poses a challenge for the governance of both the euro-area and the global political economy. Impacts Increased German investment would demonstrate goodwill and help revive the French-German axis. Refusal to address the issue could damage Germany’s credibility in the EU and worldwide. Despite some spending increases, a balanced budget may remain a priority -- especially for a CDU-led government. Germany runs a surplus on both its US goods and services trade; the only major economy to do so -- leaving it vulnerable to protectionism.

The UK’s trade bill will rise sharply outside the EU

2017 ◽  
Keyword(s):  
Services Trade ◽  
Goods And Services ◽  
Trade Bill ◽  
The Cost ◽  
The Eu

The likelihood of hard Brexit has risen and if WTO rules are adopted, the cost of UK goods and services trade will rise

scholarly journals SELECTED REFLECTIONS ON EXTERNAL SUPPORT AND ENDOGENIZATION – WITH SPECIAL CONSIDERATION FOR THE EUROPEAN UNION

Ekonomika ◽  
2010 ◽  
Vol 89 (3) ◽  
pp. 7-19
Author(s):  
Bogusław Fiedor
Keyword(s):  
Comprehensive Evaluation ◽  
Value Added ◽  
External Support ◽  
Growth Theory ◽  
The European Union ◽  
Cohesion Policy ◽  
Goods And Services ◽  
New Growth Theory ◽  
Definition Of ◽  
The Eu

The paper starts with a brief discussion of two aspects of convergence hypothesis. The first one (theoretical) refers to standard growth theory, the second is of normative character and pertains to axiological aspects of socio-economic policy, also including the EU cohesion policy. Not aiming to provide any comprehensive evaluation of that policy from the viewpoint of its actual effect on elimination of differences in social and economic development among the European regions, the paper provides selected reflections concentrated on:• an attempt of formulating a viable interpretation of cohesion policy (CP) as a form of ‘regulated capitalism’; the attempt in question refers to the normative approach towards public regulation in a market economy but defines the general rationality and fundamental objective of cohesion policy in terms of setting activities directed towards provision of the public goods that stimulate and facilitate exchange of goods and services among regions, thus contributing to the dynamization and endogenization of growth in poor or less developed regions;• the need of growth endogenization as the main objective (and main condition) of effective implementation of cohesion policy, provided that the definition of such endogenization is broader than that employed in the new growth theory. In particular, not rejecting the new growth theory definition of endogenous growth, the author pays special attention to the necessity of maximizing the regional value added through raising the level of processing broadly understood region-specific economic, social and others factors and resources;• correlations between the effects of distribution and growth within the scope of cohesion policy. It is analyzed from the perspective of three important questions: (1) Are the aims of social cohesion and growth competitive, or mutually complementary and reinforcing? (2) Why the hypothesis of regional convergence fails to explain the EU perspective, despite two decades of ongoing efforts of implementing active cohesion policy and regional policy? (3) Whether, and to what degree, the elimination of differences in the level of regional development is a legitimate strategy in the light of the controversy ‘equality vs. effectiveness’.

On the Future of the Financial Redistribution across Member States in the EU

2006 ◽  
Vol 56 (1) ◽  
pp. 1-43
Author(s):  
Sándor Richter
Keyword(s):  
Value Added ◽  
The Other ◽  
Current Debate ◽  
Member States ◽  
New Member States ◽  
Financial Position ◽  
Cross Member ◽  
Expenditure Structure ◽  
The Eu ◽  
Made In

The order and modalities of cross-member state redistribution as well as the net financial position of the member states are one of the most widely discussed aspects of European integration. The paper addresses selected issues in the current debate on the EU budget for the period 2007 to 2013 and introduces four scenarios. The first is identical to the European Commission's proposal; the second is based on reducing the budget to 1% of the EU's GNI, as proposed by the six net-payer countries, while maintaining the expenditure structure of the Commission's proposal. The next two scenarios represent radical reforms: one of them also features a '1% EU GNI'; however, the expenditures for providing 'EU-wide value-added' are left unchanged and it is envisaged that the requisite cuts will be made in the expenditures earmarked for cohesion. The other reform scenario is different from the former one in that the cohesion-related expenditures are left unchanged and the expenditures for providing 'EU-wide value-added' are reduced. After the comparison of the various scenarios, the allocation of transfers to the new member states in terms of the conditions prevailing in the different scenarios is analysed.

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