Issues of Improving Value Added Tax

This article examines the challenges and improvements needed in the application of Value Added Tax (VAT), an indirect tax widely adopted globally. VAT’s regressive nature and burden on low-income groups are highlighted, along with its influence on consumer demand and inflation. The paper analyzes VAT’s advantages, such as its wide tax base and automatic adjustment to inflation, which make it crucial for fiscal efficiency. It reviews various VAT calculation methods, exemptions, and rate-setting practices, discussing the economic impact of these factors. Through a literature review and comparative analysis of VAT practices, the study identifies key areas for reform, including rate optimization, reduction of exemptions, and tackling the “VAT gap” to enhance revenue and compliance. In this research work, the features of VAT application, tax rate setting and consequences of VAT exemption are considered. A review of scientific literature on VAT was carried out. The assessment of VAT, rate setting, imbalances in tax exemptions and tax breaks are analyzed. As a result of the analysis, relevant conclusions were formed.