Привлачност ПДВ-а у контексту економске кризе
The Appeal of the Value Added Tax in the context of Economic Crisis

Summary/Abstract: In this paper, the author explores the ever-increasing application of Value Added Tax (VAT) in the process of fiscal consolidation which is underway in some European states. The states’ need to reduce the budget deficit serves as an incentive for raising the VAT rate. The author points out that such a change in tax policy may eventually result in unfair taxation practices. First, the author provides a brief explanation on VAT as a general tax on consumption, with specific reference to the long-standing dilemma: whether it is better to tax revenues or consumption. Further on, the author elaborates on the possible role of this tax in the process of fiscal consolidation in some European states. In the final part of this article, the author analyzes the relationship between raising the VAT rate and providing for fairness in taxation practices. In order to overcome the financial crisis and their poor fiscal position, a large number of European countries have resorted to introducing radical saving programs, which are most likely to aggravate the prospects for their economic recovery. These measures have been accompanied by more or less substantial changes in their tax systems. Due to their flexibility, taxes on consumption are more suitable instruments of fiscal policy than other taxes but their use has certain limitations because they enhance inflation, reduce demand, encourage unfair distribution of tax burden and increase taxation costs. Applied as an instrument of fiscal consolidation, the VAT demonstrates both positive and negative characteristics, which yield quite different effects in the circumstances of current financial crisis than they would normally generate in regular economic conditions. Taking into account the indisputable abundance of revenues stemming from the VAT, fiscal policy makers may easily predict the desired revenue growth. However, the reality of such expectations is disputable primarily because of the reduced general consumption, which comes as a result of salary cuts or loss of employment by a large number of people. Being the most important VAT features, abundance and flexibility are less prominent in the circumstances of weak economic standing due to the reduced consumption power of tax payers. On the other hand, the wider application of VAT will certainly enhance the unfair taxation practices in the European tax systems.

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