TAXATION AND ECONOMIC DEVELOPMENT IN THE FORMER COMMUNIST BLOC. A PANEL DATA APPROACH

Abstract

Taxation and its implications are an increasingly debated topic since taxation is a very important tool for the governments of all countries in controlling public finances. At the same time, taxation regulates in one way or another the wealth of a country and, implicitly, of its citizens. In this sense, through this paper we aim to analyse the impact of taxation on economic growth felt by citizens, and our attention has been focused on EU Member States from the former Communist Bloc: Hungary, Poland, Romania, Slovakia and Slovenia. To measure the economic growth felt by the citizens, the best proxy is GDP per capita. Regarding taxation, we resorted to the use the revenues registered from personal income tax, corporate income tax and VAT. The chosen countries share a similar past and had in one way or another the same starting point in the 1990s. These countries are also from the same geographical region (Central and East European countries) and have to some extent comparable economies. Furthermore, we performed an econometric analysis with panel data for the period 2003-2018. The results thus obtained from the econometric tests indicated by an econometric model with random effects showed a direct positive relationship between the dependent variable and the independent variables. The coefficients obtained were statistically significant in the case of independent variables represented by the revenues from personal income tax and VAT, while the coefficient related to revenues from corporate income tax proved to be statistically insignificant.