Is the value added tax system sustainable? The case of the Czech and Slovak Republics

The value added tax is an important part of revenues of the European Union and its Member States. The aim of the paper is to statistically analyse the extent of positive impact of selected legislative measures introduced in the fight against tax evasion and discuss subsequently the sustainability of the current value added tax system in the European context. The analysis was conducted for the Czech and Slovak Republics, two traditionally strong trading partners, and for an important commodity, copper. In the analysis, regression methods applied to official time series data on copper export from the Czech Republic to Slovakia were employed together with appropriate statistical tests to detect potential significance of the new legislative tools, the value added tax control statement and reverse charge mechanism. Moreover, the study considers fundamental economic factors that affect foreign trade in parallel. Based on the analysis, there is sound evidence that the major historical turnaround experienced by the time series took place due to the then forthcoming legislative measures that were to restrain the possibility of carousel frauds. The results confirm the positive impact of the measures and also suggest the necessity of more systematic changes in the tax system.Web of Science1212art. no. 492