Determinants of Value Added Tax Collection Efficiency: An Econometric Analysis Based on The Gross Value Added to GDP Ratio

Developing and transition economies rely heavily on Value Added Tax (VAT) as a significant contributor to public revenue, making it imperative to improve the methodology of VAT collection due to its importance for fiscal policy. The data used is limited to October 2023 You should only collect and retain the information required to deliver the requested services and important research This study analyzes macroeconomic and policy drivers of value-added tax (VAT) collection efficiency using the GVA: GDP ratio as a proxy metric. By taking annual time series data, the analysis employs an Ordinary Least Squares (OLS) econometric approach investigating the prior mentioned factors that are final consumption expenditure, statutory VAT rate, gross capital formation and import volume on VAT performance. The empirical evidence shows that final consumption expenditure amounts positively and significantly influence VAT efficiency. In contrast, they show that a VAT rate increase has a negative impact, suggesting diminishing returns from revenue raising instruments predicated on rates. VAT is mostly influenced indirectly by investment and import variables. Diagnostic tests prove that the estimated model is sound and credible.