COMPARATIVE ANALYSIS OF VAT EVOLUTION IN THE EUROPEAN ECONOMIC SYSTEM

Transcription

1 COMPARATIVE ANALYSIS OF VAT EVOLUTION IN THE EUROPEAN ECONOMIC SYSTEM MIHAELA ANDREEA STROE * Absrac In hs paper we sudy a comparave analyss of VAT n dfferen saes of he world. I made some observaon on hs heme because I beleve ha VAT s very mporan n carryng ou ransacons and he ncrease or decrease of hs ax has a major mpac upon naonal economes and also on he qualy of lfe n developng counres. The papers has o pourpose o make a comparson beween he Amercan and European sysem of axaon wh s advanages and dsadvanages and, n he end o render an economc model and s sascs componens. VAT s a value added ax whch appeared abou 50 years, nally wh wo purposes: one o replace ceran ndrec axes, and anoher o reduce he budge defc accordng o he fah of ha me. The frs counry ha has adoped hs model was France, callng oday as value-added ax. Keywords: rae, ax, VAT, budge defc Inroducon One of he mporan facors ha led o hs measure was esablshed o avod ax cascadng phenomenon, namely he axaon of he same produc. Today ofen easer and more correc, ax only he value-added produc. Ths s why we consder axes a necessary phenomenon. Along parallel beween he U.S. and Europe whch has been aken as reference models n order o dscuss and debae her favorable and less favorable pons, and mos of hem n my opnon s represenave of he French model, mplemenaon of he ax where had a benefcal role n he economy. As an example, we use he European model whch s used n he VAT and he Amercan model. In he frs chaper I alked abou he effecs of nroducng VAT n he euro zone and pros o hs measures. On he oher hand we wll use he U.S. model as an example for counres ha have nroduced hs ax measure. I wll be dscussed he pros and cons of mplemenng hese measures n boh Europe and he USA and see why are he reasons for whch VAT was mplemened or no. In he nex chaper I wll analyze some concree examples of Europe counres ha have value added axaon sysem and wll analyze he benefs ha were subsequenly nroduced hs measure n developng economes. Today mos European Unon saes have ncreased he rae of VAT and he effecs of hs measure for each economy parcpan wll be a subjec of debae. The larges VAT ncrease snce 00 had 5 percen, he case of Romana wll be dscussed and also he effecs of hs ncrease. Ths ncrease was prmarly due o he populaon, and secondly due o he economy. However, n addon o counres ha have ncreased he VAT rae o reduce he budge defc exss also he counres ha have no mplemened hs measure, lke France. Separaely wll dscuss abou ax reform and he reason whch have no adoped he VAT ncrease n 00 hus makng a parallel wh he curren suaon n Romana. I consder necessary he parallel beween Amercan and he axaon of European counres n order o see he effecs on he populaon especally a he me when hs mehod had been nroduced bu also o deermne he need for ha change n he economc envronmen. To see wha effec had he change when decded o reduce s rae of VAT, and especally f had he desred effec. Furhermore, I have chosen our counry as a reference model o deermne wha effec had ncreased VAT revenues n 00 and especally he unvnro). * Asssan, Economc Scences Faculy, Ncolae Tulescu Unversy, Buchares (e-mal: sroeandreea@

2 967 share of VAT and s drec relaonshp wh revenue. In hs model we deermne wheher he ncrease n VAT n our counry had a negave effec of hgher governmen spendng and see wha seps were aken o overcome he crss n Romana and especally her effecveness. A he end of he work are presened conclusons and also some mehods for mprovng he Romanan ax now, and we wll see f Romana has acheved s purpose by ncreasng he VAT by 5 percen, especally f aken fscal measures wll be able o recover Romana. COMPARISONS OF TAX POLICY IN THE EUROPEAN AND ECONOMIC SYSTEM In hs comparave approach of VAT n Europe versus he Uned Saes, we wll deermne why he U.S. dd no wan o adop hs ax, value added and he advanages and dsadvanages of s mplemenaon. In a paper drafed n 00 and suggesvely named "ax sysems n he world," Lawrence W. Kenny Amercan professor says: "There s surprsngly lle emprcal work o explan why he counres choose dfferen ax polces." Alhough beween ax sysems currenly exsng n he world here are some smlares, however, we mus observe ha each counry has s own ndvdualy generaed by specfc elemens (radons, hsory, relgon) and n fndng a common ground should be deermned on he bass of whch can ndcae smlares and dfferences beween wo or more counres. VAT s desgned o charge effcen and comprehensve personal consumpon n a economc reform.tva se was mos prevalen n he second half of he 0h cenury and no he s cenury, and proved o be a major source for governmen nformaon.tva's revenue s used boh n developed and developng counres, boh a local, naonal and supra-naonal level (European Unon). I s effecvely an ndrec ax, orgnally adoped n France a he nave of M. Laure n 954.In he followng years he value added ax was adoped on January 970 o all Common Marke counres ax replacng he movemen of goods cascade ha leads o axaon. VAT s n fac a ax on consumpon n general, calculaed and appled a every sage of goods and servces flow from prmary producon o fnal consumpon sage. Unlke European powers, he Uned Saes of Amerca had many aemps o mplemen VAT n recen years bu whou success. Ths s due o he fac ha VAT s regarded as havng hree weak pons, namely: he frs, s consdered o be so-called "money machne" n he hands of governmen, secondly s consdered ha he VAT s regressve, and a las s beleved ha consumpon axes are used o broaden he Sae ax. In 006, Keen and Lockwood pons ou he exsence of wo ypes of "money machne", a poor form and poor srong. Ths form s characerzed by he assumpon ha counres wh VAT budge revenues hgher han hose whou VAT, or a leas he same, whch could lead o a beer moblzaon of savngs nsde a beer fnancng of ceran secors. In sronges form s suggesed ha an ncrease n budgeary revenues resuls n an ncrease n governmen spendng s no benefcal whn an economy. Such sudes showed las year he oppose, namely he Amercan belef ha he VAT s no so-called "money machne" n he hands of pro governmen. An anoher argumen for applyng VAT n he U.S. s ha would reduce he defc of he budge. Ths conradced by Alverson (986) showng ha he average budge defc s hgher n counres ha have adoped he VAT as a form of axaon and ncreased more rapdly wh he mplemenaon of VAT, excep n counres ha have adoped hs mehod. Al Agha and Jonahan Haughon (996) sang ha VAT s he perfec money makng machne.take, for example when Swzerland wh he nroducon of hs ax, budge revenues have no ncreased, remaned he same as n he perod before he nroducon of VAT, bu n developng counres such as New Zealand budgeary revenues have ncreased subsanally. VAT proponens conclude ha compared wh oher forms of axaon, VAT s no dscouragng savngs and creae ceran ways of far compeon n nernaonal rade. I s sad ha he burden of VAT may be n he wors case proporonal and regressve f no he denomnaor for purposes of measurng he ax burden was a lfeme ncome raher han annual ncome as

3 968 Challenges of he Knowledge Socey. Economy conradcng Amercan economss. We noce ha he socals saes end o use more han oher regmes, ax sources Corporaon, sales and excse axes, so ha busness can be more easly monored.there s a srong deologcal neres n axng busness and a necessy lower n ndvdual axaon o acheve socal goals. Makng parallels beween he fscal pressure of he EU member counres and apprecaon of he level of ax burden n he European Unon n general s also facng many dffcules, due o he fac ha ax levels are no he same from one counry o anoher. Dsagreemen s due o a varey of general and specfc facors for each counry. Mos mporan are he followng: dfferences n reference perods and mehods; socal secury conrbuons, whch are que large n some counres (ncludng Germany), ax levels are somemes ncluded, somemes no, an example of hs s gven by employers' socal secury conrbuons for governmen employees; requred governmen conrbuons are no ncluded n fscal repors; axes on nherance and gf axes are somemes consdered, somemes s esmaed ha axes should no be ncluded n he caegory. For EU counres, VAT and cusoms dues somemes appear as a ne value sum. In he researched work, hey also show ha he level of axaon s deermned and nfluenced by many facors, and ha beween axaon and s base and he level of GDP here s no src correlaon. In a bref lsng of facors nfluence he ax burden s represened by he volume of publc expendure, whch depends on varous economc, socal and polcal,o reduce he effec of regressve some counres; especally n Easern Europe, have provded subsanal reducon of VAT on consumer goods and also prmary healh servces, and hs s underlned by Angelo Fara (00). When he consumpon ax rae ncreases on hgher ncome levels means ha hs rae s progressve, when hs rao s proporonal when we deal wh a proporonal ax, we say ha hs rae decrease s a regressve ax Unable o pay hs fee are hose who feel he ax burden harder. Bu hs regressve s reduced by ceran exempons from VAT for commodes and populaon. The necessary medcal servces o France and New Zealand red o reduce hs effec by collecng he ax on socal secury and s spendng for poor grades. Anoher pro argumen s ha VAT s no sgnfcanly dfferen from oher fees and does no encourage such an ncrease n axaon or o rase governmen spendng. On he oher hand, opponens argue ha a VAT ncrease n axaon wll brng governmen spendng, and hs form of ax rases he overall ax burden oo easy. Anoher appeal of VAT s ha s vulnerable o fraud sgnfcan, hs s o say ha fraud losses n hese counres was abou 0% ne ncome of such damage VAT colleced. We can remember Germany (.5% of revenues from VAT) and he UK (abou.5 o.5% of revenues from VAT). Cnossen says ha ax s probably he bes ever nvened n erms of ncreasng budge revenues, bu also n erms of fraud s much easer a ax fraud and RST (Real Sales Tax). Bu sll, VAT fraud s sgnfcanly less han oher ypes of consumpon axes, propery axes because refers o dfferen sages n producon and no o he fnal propery ax as s used n he Amercan sysem. (Real Sales Tax). Ths form of axaon, perhaps beer han he VAT s much less expensve o mplemen because represens jus he fnal propery ax and s much faser o mplemen n he ax sysem of a counry, bu has one bg dsadvanage: s much easer o rg. Ths ype of fraud s based on a farly smple mechansm, a leas n appearance: he counry of orgn rader VAT nvoces (as performed an nra-communy, whch fall no he caegory exemp operaons wh rgh of deducon), and he operaor economc desnaon counry applyng he reverse charge for hs operaon (because makng an nra-communy acquson calculang and accounng for VAT on Angelo Fara (00) - "Tax Polcy IMF Fscal Affares Deparmen Handbook" (P75). Brd, Rchard M. & Cnossen, Sjbren "The Personal Income Tax: Phoenx from he ashes?".

4 969 nra-communy acqusons, so ha VAT s colleced, as well as he ax deducble, bu whou acually pay ).Pggo and Whalley (n 00) llusraes ha expandng he ax base of VAT n developng economes can reduce he populaon welfare secor nformal. Ths deeper crque was developed by Joseph Sglz a he Congress IIPF 003. Many counres n Easern Europe have adoped lower VAT raes ax hopng o reduce he evason ha would be creaed wh he adopon of a hgher rae. Many European counres have adoped hs form of axaon as opposed o leng he Uned Saes as ncome levels ncrease furher or beng nroduced as a subsue for exsng axes. Comparng he ncome ax used by counres ha have adoped VAT n European counres we can say ha ncome ax s more flexble as a ool o acheve a progressve ax. 3 However, unlke he European model, Amercans have no VAT n he ray nsead hey have a smlar sale of VAT rangng from 5% o % beng mposed n many sages of producon (RST-Real Sales Tax). Bu sll why VAT s beer han a sales ax ha excludes axes lke VAT cascade? In case of VAT, he axaon s akng place n varous sages of producon, so s much more dffcul o nearly mpossble o fnd ceran Legal wckes. Counres ha have adoped VAT charge have chosen hs pah because hs srucure does no mee budgeary requremens. Also hs mehod has rased a number of problems and over he years hs have been nensely debaed. Thus dependng on he levers of governmen each counry has s own sysem of axaon,so ha n some saes hs form of consumpon ax works, bu n oher counres lke he U.S. s consdered neffecve. Comparng ax raes n he world s dffcul and somewha subjecve, ax laws are complex and n mos counres he ax burden fallng on dfferen groups n each counry. However, a srong pon of hs charge s ha avod cascadng charge ( charge apples several mes on he same ncome) by axng he value added a each sage of producon. Ths praccally be he man reason ha mos counres n Europe adoped VAT. In he char below we see he number of counres ha have mplemened hs form of axaon over he years: Value Added Tax (fla ax colleced dvded as s called) s calculaed n Romana on ncreasng he value added by each underakng parcpang n he cycle of makng a produc or performance of works ha fall n he ncdence of hs ax crcu elmnang nequales beween 3 John Pggo & John Whalley, "VAT Base Broadenng, Self Supply, and he Informal Secor".

5 970 Challenges of he Knowledge Socey. Economy phases economc producs, applyng he arbues on s share of all economc acves. Value added s he dfference beween he proceeds from he sale of goods or servces and effecual paymens for goods or servces relang o he same sage of economc cycle. By seng he value added o avod repeaed enres exernal consumpon (consumpon from hrd pares) of producve enerprses. VAT ax s a sngle, neural, and paymen o be made n a sngle par. The characer of hs form of axaon weher you cycle hrough raw maeral o fnshed produc realzaon (n hs way can pass by wo or more companes), s he same level as he rae of axaon, he ax s no dependen on he exen of he economc cycle, s applyed a every sage of manufacurng value added. Operang sysem of value added s based on a fundamenal prncple ha he fee charged for goods delvered and parner servces rendered mnus he fee for goods or servces purchased or manufacured n her own uns for he realzaon of axable operaons The objec s he value of axable goods, works and servces a bllng prces an also a axable lump sum from he sale. The mechansm by whch one deermne he VAT due o sae budge connues o show succncly. The VAT accoun s recorded oupu VAT colleced on sales or work produc. The accoun s regsered VAT pad npu,vat on buyng by raders of maeral, o receve papers whch were made or he paymen of benefs. Reducng he oupu VAT resuls npu VAT whch he operaor has o pay sae ax (VAT o pay). If hs dfference s negave,oupu VAT s less han he npu VAT, meanng ha he rader has o recover hs amoun from he sae. I s easly seen ha he rader s no affeced by VAT, and pays only one who acually bear he ulmae consumer. In fac, he producer who purchased raw maerals, manufacures supplers, alhough wh he delvery of her share of VAT pad do no suffer a moneary loss because he asse sale wll collec ha amoun, sae and wll reurn ha value bu he fnal consumer s no creded by he sae, so ha wll fully suppor he value added ax relaed. From produc ax, value added s consdered a consumpon ax, borne by he fnal consumer and he sae budge. Therefore an ncrease n he ax rae prmarly affecs he fnal consumer for he same commody bough n a prevous perod wll have o pay more n he curren perod. Regardng foregn rade, VAT s no pad for expors and mpors. VAT leved on mpors s o offse losses whch occur due o axes expor. If goods were delvered o he nernal sae, revenues would ncrease. Also, he VAT on mpors represenes an equalzaon of opporunes for companes, because f here s no VAT for mporng foregn goods he compeveness of prces would be more appylng ha he naonal one Counres where he produc s consumed mplemened VAT and no where performs. Consequenly, everyhng s expored, s compleely absolved of payng hs ax, bu wha s mpored s axed accordngly. VAT has a greaer elascy o economc processes n he sense ha, f he busness s developng, he VAT paymen wll be hgher. If sales sagnae and VAT amoun wll be lower consequenly n sae revenues. The VAT as well as all ndrec axes "copy" he economy gong. VAT s a ax, hgh ax effcency, bu ha any ndrec ax s unfar. Ths ranslaes n ha VAT s regressve n relaon o revenue growh and do no lend hemselves o a mnmum nonaxable. The VAT affecs more pronounced low-ncome people and hose who affec a large proporon of her ncome for consumer spendng. In our counry he VAT was nroduced for he followng reasons: reasons of compably wh he ax sysems of European counres o ncrease resources for he sae and he necessy of replacng he oudaed formula has been axed on he movemen of goods. Our counry's accesson o EU economc srucures mposed a seres of changes n he naonal ax legslaon o harmonze wh European regulaons doman.in global crss, he governmen of Romana was forced o ncrease he VAT rae from 9% o 4% o shrnk he defc hs way budgeary. I s rue ha hose who fel ha hs change was more low-ncome populaon small, he fnal consumer n he poson are hose ha suppor hs growh.among European counres, Romana had he hghes rae ncrease along wh and arousng dsconen of he populaon who have experenced a rse n consumer prces. Ths ncrease had he nended effec,

6 97 regserng a subsanal ncrease from he sae budge. Wh hs ncrease n overall share of VAT revenues ncreased ndcang an ncrease n revenues as he char below llusraes: The srucure of VAT n he oal ncomes of he budge Source of daa: Naonal Insue of Sascs, INS To play mulple lnear regresson model we used daa on he Uned Kngdom, beween 990 and 007 abou he oal ndrec axes, excse dues, VAT and consumer prce ndex, hus mplemenng he daa exraced n Evews. The base year chosen s 000. Values are aken from he able below are expressed n mllons of pounds. Year Toal ndrec axes Excse dues VAT Prce ndex , , , , , , , 46.96, , ,3 50.6, ,99.5 Surs : The lnear mulple model s: Imp _ nd _ o * accze * TVA 3 * IPC e ; =,,,T, unde T=8. In Evews, he model s: Imp_Ind_To=C() + C()*Accze + C(3)*TVA + C(4)*IPC Imp_Ind_To = 858, *Accze *TVA *IPC

7 97 Challenges of he Knowledge Socey. Economy Tabel The resuls for esng he parameers model n Evews For esng he parameers model, s used he es Tes suden The hypoheses are: The nule hypoheses, H 0 : = 0 or = 0, =,,3 The alernave hypoheses, H : 0 or 0, =,,3 Thus, he coeffcen of excses s =.4945, he sndard error SE ( ) = , and ˆ Coeffcen he sascs ˆ = 7.6, calculaed hus: ˆ ; he value p (p value) = SE( ˆ) Sd. Error , whch shows ha he volum of excses n he oal ndrec axes s an mporan facor. The VAT coeffcen s ˆ.05874, he sandard error SE( ˆ ) , and sascs ˆ = The value of hs probably s , so VAT s anoher sgnfcan componen of oal ndrec axes esmaed regresson model. The coeffcen of he prce ndex s ˆ , sandard error SE( ˆ ) , hus he sascs ˆ Bu he probably for hs ndcaor s 0.3, whch exceeds he hreshold of Bu suden es ( es) has an assocaed p-value of 0.3 ha s close, so we can say, by assumng a.3% rsk of error ha we are dong by rejecng he null hypohess s sll small, so we can o rejec, and hus nfluence he CPI's oal ndrec axes. The nercep s =858.49, he sandard error SE ( ) = , he sascs =.49876, and he p value s Alhough he exceeds he probably of 0.05 applyng he es we can say ha we ake a rsk ha he value of 5.63% o be 0 and hus rejec he null hypohess, accepng he fac ha free me s sgnfcan for mulple regresson model chosen.

8 973 Repor of deermnaon ( R ) ndcaes wha percenage s explaned by he sgnfcan e SPAR nfluence. I s calculaed as: R. I s used n assessng model qualy. I SPAT SPAT can ake only values fallng n he nerval [0,]. The values are closer o, he model s beer. The value ha we ake here s , and hus we can say ha he regresson model s good. Approxmaely 99.95% of oal ndrec axes are explaned by mulple lnear regresson model chosen. S.E. regresson s he followng ndcaor of our able, calculaed as follows: Resd. SEof Regresson n r , where r represens he errors; Then SE of Regresson= Imp_ nd _ oˆ ˆ ˆ * accze ˆ * TVA ˆ 3* IPC Imp_ nd _ oˆ * accze.05874* TVA r = Sum Square The prevous able conans he value of he resduals for each among from he 8 calculaed: r Imp_ nd _ o Imp_ nd _ oˆ 57.64* IPC. Tabel 3: The values for resduals, acual and fed ndrec axes Chars explanng resdue values were also exraced from Evews as follows: he below graph were resdues s calculaed as oal ndrec axes char aken from able n nomnal source, represened by he red lne (Acual) and oal ndrec axes aken char adjused value, represened by he green lne (Fed). The blue lne, s represened precsely by he dfference of he resduals of he oher wo values above

9 974 Challenges of he Knowledge Socey. Economy Tabel 4:The values for resduals, acual and fed ndrec axes I can be noed ha he nomnal values are almos equal, so he lnes overlap almos second char hus resulng n low values of her resdues. F es s used o es he valdy of he model as a whole. I s calculaed as he rao beween he varaon explaned by regresson and regresson unexplaned varaon each of whch s n urn dvded by her degrees of freedom. The calculaon formula looks lke hs: (ˆ y y) / k F wh k = number of varables for he model, here 3 and T = ( y yˆ ) /( T k ), number of observaons 8. Analyzng he daa n our model we see ha F = and a probably of Therefore, we accep ha overall mulple lnear regresson model s beer suded. The mulcolnary es: The es of Klen For he mulple lnear model chosen: Imp _ nd _ o * accze * TVA 3 * The hypoheses are: H : x x > R s he mulcolnary phenomenon; H 0 : r x, x r, j j < IPC ; R s no he mulcolnary phenomenon; e

10 975 From EVIEWS he obaned resuls: Correlaon Marx TVA IPC IMP_IND TVA IPC IMD IND Tabel 5: The correlaon marx Value s and fnd ha s greaer han he pearson coeffcens so mulcolnary phenomenon s no presen n he mulple regresson model. To check homoscedascy Homoscedascy refers o he hypohess ha he regresson model ha saes ha errors mus have he same varance model: for any =,..., T. Homoscedascy presence or no we can denfy boh graphcally and by sascal ess. Graph resduals can no say for sure ha neher he exsence nor he homoscedascy heeroskedascy. The bes known es s Whe's es o es he followng hypoheses: The nule hypohese H 0: The alernave hypohese H : for all =,...,T for a leas one. Tabel 6: The Whe es appled for our model for es homoscedascy For he nal model has been buld:

11 976 Challenges of he Knowledge Socey. Economy e 7 0 * accze * accze * TVA 8 * TVA * accze * IPC 3 * IPC 9 4 * accze * TVA* IPC v 5 * TVA 6 * IPC New errorsv are normally dsrbued and he ndependen of e. In hese crcumsances I have he null hypohess: he alernave: no all parameers are zero. If we accep he null hypohess when he hypohess homoscedascy accep, and f here are dfferen parameers of 0 accep heeroscedascy. Oupu able for hs new model obaned by regresson apply es of sgnfcance for each coeffcen separaely. The probably s for he free me ha exceeds he hreshold of 0.05 and 0.8 s smaller han ha are n he area of uncerany. In hs nerval are coeffcens of varables wh wo excepons, he coeffcen of VAT and he coeffcen of CPI. For laer, we can accep he null hypohess. Also for F-es probably s que hgh and agan locaed n he area of uncerany, p = Consderng he value of p we could say ha we rejec he null hypohess (presence of heeroskedascy) wh an error of 73%, herefore we can accep he null hypohess (presence homoscedascy) wh an error of 7% (00% -73%). The auocorrelaon analyss of he frs rank: The Durbn Wason es: cov( e, e ) 0 For he analysed equaon: Imp _ nd _ o * accze * TVA 3 * IPC e ;frs-order auocorrelaon of errors s expressed by he relaon: e e v, for =,...,T where v ~N(0, ). DW sascal es used par of hypoheses: H 0 : = 0 (he nule hypoheses); H : 0 (he alernave hypoheses). DW sascs are abulaed, s values depend on he specfed sgnfcance level, he number of observaons n he sample and he number of varables nfluence he regresson model. Ths, for a specfed sgnfcance level, has wo crcal values s obaned from he DW ables. Rejec he null hypohess regons are defned as: If DW ( d,4 d ), does no auocorrelaon,f DW ( 0, d) he posve auocorrelaon of he resduals;f DW ( 4 d,4) he negave auocorrelaon of he resduals;f he DW s beween he wo nervals ( d, d ) or ( 4 d,4 d) he es s no conclusve.in he model analyzed, DW sascs =.634. For a sgnfcance level of 5%, a oal of 8 observaons and four varables nfluence he sascs are abulaed values: 0.93 and.69. The value obaned n he model belongs o he range so we can no rule on he auocorrelaon of dsurbances. Afer analyzng he daa enered n he mulple regresson model, for bes resuls on homoscedascy, auocorrelaon of errors, or model of normaly may ener more observaons o capure he relaons beween hem Conclusons The model whch explaned he relaonshp beween he ndrec axes, VAT, CPI and excses s a vald model and he majory of parameers are sgnfcan. The relaonshp s lnear and srong beween he four varables. I was suded he hypoheses for esng our model. I hnk ha s a srong relaonshp beween ha four varables because he axes represen an mporan facor for he qualy of people s lfe. If people are pressured by he axes, hey canno concenrae for ncrease her educaonal level and hey are only orened how o obaned money.

12 977 The model can be mproved by analyzng a long seres of daa and can be exended for many counres and he obaned resuls can be compared and can be esablshed whch counry has he beer axaon sysem. VAT s n fac a ax on consumpon, calculaed and appled a every sage of goods and servces flow from prmary producon o fnal consumpon sage. Many European counres have adoped hs form of axaon as opposed o Uned Saes as ncome levels ncreased furher or were nroduced as a subsue for exsng axes. Comparng he ncome ax used by counres ha have adoped VAT n European counres can be sad ha ncome ax s more flexble as a ool o acheve a progressve ax. Comparng ax raes n he world s dffcul and somewha subjecve, ax laws are complex and n mos counres he ax burden fallng on dfferen groups n each counry. Value Added Tax s calculaed n Romana on ncreasng he value added by each underakng parcpang n he cycle of makng a produc or performance of works ha fall n he ncdence of hs ax crcu elmnang nequales beween phases economc producs, applyng he arbues on s share of all economc acves. Fscal pressure generaed by he sze of axes pad by axpayers s hgh n Romana and dsrbue.in Romana VAT became he arge of argued opnons due o he ax burden on he populaon and especally small and medum busnesses, besdes drec axes populaon suppors a seres of ndrec axes whch currenly holds he prncpal place whn fscal resources. A hgh axaon, a sck economy can only have negave consequences because of he dsrup demand for goods and servces and less lkely nvesmens. Among varous ax savngs n order o arac resources used by he Sae budge, hose whch are pressured are sgnfcan ax: personal ncome ax, consumpon axes and socal conrbuons. I beleve ha ndrec axes are very burdensome for axpayers and he dmensons of ncome and wages are lower compared o he fees and charges ncurred by ndvduals. For a more judcous dsrbuon of ncome he ax sysem s necessary for polcymakers o consder how s consruced, he crera underly he dfferenaon of axes and how hey parcpae n he formaon of budgeary resources. I apprecae ha n he curren perod, he confguraon of our counry's ax revenue wll overppe he balance n favor of ndrec axes along wh he ncrease n VAT o 4%, resulng n ncreased ax burden on labor, wh exremely negave effecs on nvesmen and savngs. References Alan A.Ta (995) Value Added Tax :Admnsrave and polcy ssues Alan Schenk,Olver Oldman - Value Added Tax:a comparave approach Angelo Fara (00)- Tax Polcy Handbook IMF Fscal Affares Deparamen Brd, Rchard M. &Cnossen, Sjbren( 998)- The Personal ncome ax : Phoenx from he ashes? John R. McGowan, B. Anhony Bllngs - An Analyss of he European Communy VAT: Implcaons for U.S. Tax Polcy John Pggo & John Whalley(00) -"VAT Base Broadenng, Self Supply, and he Informal Secor," Laurence S. Sedman The USA ax : a progressve consumpon ax Lawrence W. Kenny(00)- Fscal sysem across he world Rchard Mller Brd,Perre-Pascal Gendron- The VAT n developng and ransonal counres.