A Review of Tax Revenue Efficiency based on VAT during Economic Fluctuations: A Cross-country Survey

The economic fluctuations should be considered in financial planning and economic analysis. Since tax is the main revenue of government، it is necessary to pay attention to the different tax bases revenue behavior during different economic fluctuations. In this paper the relationship between VAT collection efficiency (as a proxy of VAT revenue) and a production gap (as an index for introducing business cycle) were investigated. The panel data method was applied for 25 member countries for the period of 1996-2011 for investigating the relationship between VAT revenue efficiency and production gap in an econometric model. The results have indicated that there is a positive relationship between production gap and VAT revenue efficiency.