Assessment of VAT gap relationship with budget structure and macroeconomic indicators: EU countries case

ENPurpose of the article is to perform a correlation/regression analysis of potencial variables explaining the VAT gap in 28 European Union Member States between the years 2004 and 2014, for which data on VAT gap was available. Methodology/methods Research is based on analytical approach, there was invoked a systematic, logical and comparative analysis of scientific literature, quantitative mathematical-statistical technique was used for empirical data processing (calculating Pearson correlation coefficients). Scientific aim of the research is to assess VAT gap relationship with budget structure and macroeconomic indicators in European Union countries. Findings Paper revealed various determinants (macroeconomic and budget structure indicators) as some tools for understanding developments and differences in the performance of the VAT gap in EU countries. Overall developments are in line with general economic conditions. In the absence of policy changes, revenues and VAT gap tends to follow the nominal growth of the economic base, although revenues reflect a greater sensitivity to the business cycle (real GDP growth). As economy improves, VAT gap diminishes by itself due to the growing taxpayers’ income and the decline of risky intentions. When such situation occurs, it is evaluated positively, but it wasn’t taken into account on the papers’ estimations.Conclusions, The results of performed analysis cannot be fully extrapolated to all taxpayers or to the economy as a whole because their impact would be overestimated. Even though, GCI, CPI, Human Development Index correlation coefficients’ opposite direction values suggest, that strong governance, institutions and low scores of corruption, balanced social environment in all groups of countries exhibit different, but systematically negative movement with respect to the level and behaviour of VAT gap. Examined the value added tax gap relationship with budget structure and macroeconomic indicators gives a glance to the problem of tax evasion among European Union countries with consequences in the competitiveness area. This field requires continuous extension of research and results monitoring in order to deal with tax avoidance and evasion phenomenon.