Measuring the welfare costs of EU accessionThe case of VAT reform in Bulgaria |
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Authors: | Stephen Pudney Nikolay Markov & Robert Ackrill |
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Institution: | Public Sector Economics Research Centre, Department of Economics, University of Leicester, UK,;Centre for Economic and Strategic Research, Sofia,;Department of Economics and Politics, The Nottingham Trent University |
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Abstract: | We analyze possible reforms to the Bulgarian VAT system, evaluating revenue-neutral reallocations of goods to tax bands within the existing 2-rate structure. We investigate the sensitivity of the results to behavioural response and imperfect tax recovery. We find only a weak case for the use of non-uniform VAT rate structures for redistributional purposes. Selective VAT exemptions can produce approximate welfare gains equivalent to a general price fall of much less than 1 per cent for plausible specifications of social welfare. JEL classification: D31, J31, P24. |
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Keywords: | Bulgaria economic transition tax reform EU accession welfare measurement behavioural response |
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