Fiscal efficiency of VAT in the EU member states

Value added tax (VAT) in the countries of European Union is one of the most important sources of tax revenues. During the recent financial crisis, the importance of this tax has increased significantly. Despite of the fact that VAT is the best harmonized tax in the EU, the construction of VAT in member states may significantly differ. The differences may relate to issues such as the number and the level of applicable tax rates and the range of goods and services covered by the preferential VAT rates. The aim of the article is to evaluate the functioning of VAT in the EU member states. The evaluation will be carried out with the use of the synthetic measure of development. The criteria for evaluation will be provided by performance parameters such as VAT revenue ratio (VRR) and the relation of VAT revenues to GDP. The carried out analysis will specify in which VAT works best. It will be also possible to identify the factors that determine the fiscal efficiency of this tax.