Tax evasion and the state budget spending for of public needs impact to country's economy level (GDP). Cases of UE countries

Evaldas Stankevicius

Abstract


 

Purpose. The main purpose of the paper is study the interactions between the fiscal authority and the taxpayer regarding tax evasion with the relationship of the state budget spending for of public needs and the country's economy level (GDP).

Methodology:

Theoretical and empirical research its logical and statistical analysis of documents regulating the fiscal policy of  EU Member States, change in tax burden, evasion influence to relationship between GDP, social contribution in the identification of dynamic changes in the correlation analysis. The calculation regression results of the data processed in SPSS 17.0.

Results. The main findings of the research reveals the effect of the state's finance on its economy, emphasizing the importance of public expenditure for economic change and identifies the tax evasion problem relate to main purpose - what should be the composition of tax burden, government’s expenditure had positive support the country's economic (GDP).

The theoretical contribution. Tax evasion is an acute problem in all societies of the world, regardless of the tax system and level of economic development of a country and tax fraud or evasion should be put in a broader context than is required for economic analysis. Cowell (1990) emphasizes that tax evasion requires a theory of social interaction, since it is a social problem also. Therefore, part of the evasion could be explained by factors related to the social interaction between agents. In the A–S model, the taxpayer gets to an opinion about the probability of detection also by observing the other agents and their probabilities of being audited. Taxpayer's subjective belief of being detected depends on his own evasion and the evasion of others. According to Andreoni et al. (1998), there are moral and social factors that influence the decision to evade. Among these factors are the feelings of guilt and shame that agents feel by not declaring all their income. Another factor that influences the amount of reported income is the satisfaction of the taxpayer with respect to government policies. The misuse of taxes by the government is another incentive to circumvent the system of tax payments. Another study (Barth et al., 2005) explains evasion as a social phenomenon is who consider the case of two people who receive the same income, the one working longer and having a lower remuneration and other working less but getting more for time worked, and both paying the same amount of taxes. The first group feels wronged and has an incentive to lie about its income.

All these analyses consider the interactions among taxpayers, not just individual motivations to explain tax evasion and the impact of public spending on these processes.

Practical implications (if applicable). Given the fact that the social contribution is identified as one of the instruments of influencing the growth in the context of the economy, this impact often becomes the object of theoretical reflection of tax systems wellness and propriety.

Keywords: GDP, growth of economy, taxes, taxes evasion.

Paper type: Research paper or Theoretical paper.


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