Is Portion in VAT as Source of Budget of European Union Fair for Indigenter States?

  • Petr König

Abstract

The article deals with the third resource of the EU budget, which is a certain percentage of VAT returned by Member States. It focuses on correlation between average propensity to consume and Member states' GNP per capita. It is a response to critical assessments of alleged regressiveness of the third resource resulting from presumed higher relative consumption in poor vis-ŕ-vis rich countries. Correlation analysis confirms relatively high negative interdependency of both variables. However, the author does not recommend to link VAT payments to average propensity to consume. The results indicate that besides economic prosperity there are also other factors influencing the average propensity to consume. This is even clearer from the EU-13 model not comprising Greece and Luxembourg, which significantly codetermine the intensity of measured dependency. Comparison of average propensity to consume and GNPpc with the average figures for EU-15 shows four Member States where the negative correlation does not hold. The author also estimates the position of individual Member States towards further existence of VAT as an EU budget resource, including its possible abolition. While proportional payments are among realistic possibilities, introduction of progressive elements into EU budget payments is considered politically unacceptable. Despite the discussed disadvantages, VAT is found as the most appropriate tax revenue for the common EU budget.

Author Biography

Petr König

 

 

Section
Research Articles