Theoretical and Applied Economics
No. 1 / 2026 (646), Spring
The hidden side of VAT: modeling compliance and inferring collection shortfalls in Romania
Bucharest University of Economic Studies, Romania
Abstract. This study examines hidden weaknesses in VAT collection by constructing a transparent benchmark for Romania’s VAT performance and inferring a model based shortfall when observed revenues fall below levels consistent with macro and policy fundamentals. Using annual data for 2000 to 2023, VAT revenue and household consumption (as percent of GDP) are taken from Eurostat, while unemployment and internet use are drawn from the World Bank to capture cyclical conditions and broad digital diffusion. The analysis links changes in VAT performance to the standard rate regime, the post EU institutional environment, and the 2009 to 2010 crisis period, while controlling for macro structural variation. Predicted VAT outcomes are translated into an implied shortfall proxy and used to identify years of unusually weak performance relative to the benchmark. The results indicate that Romania’s shortfall signal is episodic rather than persistent, with the largest implied under collection concentrated in a small set of early years. The average inferred shortfall is about 0.160 percentage points of GDP per year, with a maximum of about 0.752 points in 2004, while 2001 and 2004 emerge as unusually weak performance years. A simple predictive check over 2016 to 2023 suggests higher errors in later years, consistent with structural change. The findings complement official VAT gap assessments by offering a single country time series benchmark suitable for diagnostics and policy discussion.
Contents
From paradox to opportunity: designing a hybrid REIT Model for Romania's emerging capital market
Human development inequality within and between selected SAARC countries using Mean Log Deviation MLD
The influence of renewable energy consumption and trade openness on carbon emissions in South Africa: an augmented autoregressive distributed lag method application
The hidden side of VAT: modeling compliance and inferring collection shortfalls in Romania
The dynamic nexus between oil price fluctuations, exchange rate volatility, and economic growth: empirical evidence from Algeria
Does unemployment influence out-of-pocket health expenditures in sub-Saharan Africa countries? Evidence from the defactored instrumental variables method
From transposition to distortion: how OECD corporate governance principles were misapplied in Romanian state-owned enterprise legislation
Information transmission in the foreign exchange market: evidence from India
The evolution of green energy utilization in Romania
On the equivalence and nonequivalence of import subsidies and export subsidies
AI-simulated reciprocity and the narrowing of decision options within human attachment psychological architecture
Shockwaves abroad and the vulnerability of monetary policy: Morocco’s Central Bank response to geopolitical shocks and commodity price volatility
Impact of growth and tax on pollution in the presence of corruption
Heterogeneous effect of financial inclusion on economic complexity in developing countries
Human ethics vs. algorithmic ethics: the limits of automating moral decision-making
Migrants remittances and economic growth in Morocco: A VAR model analysis
Determinants of inflation in Romania: A VAR approach
Effect of information and communication technologies on life expectancy and under-five mortality in WAEMU countries
Application of PHH and PHE model to Investigative FDI inflows effects on CO2 emissions in developing countries (OECD & BRICS)
Internal vs external migration: comparative patterns within the EU