Measuring the Welfare Costs of EU Accession: The Case of Vat Reform in Bulgaria

Pudney, Stephen; Ackrill, Rob; Markov, Nikolay

Measuring the Welfare Costs of EU Accession: The Case of Vat Reform in Bulgaria

Economics of Transition, Vol. 9, No. 2, July 2001

Posted: 7 Sep 2001

See all articles by Stephen Pudney

Stephen Pudney

University of Essex - Institute for Social and Economic Research (ISER)

Rob Ackrill

Nottingham Business School (NEW L8), Nottingham Trent University

Nikolay Markov

Centre for Economic and Strategic Research

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.

Keywords: Bulgaria, economic transition, tax reform, EU accession, welfare measurement, behavioural response

JEL Classification: D31, J31, P24

Suggested Citation: Suggested Citation

Pudney, Stephen and Ackrill, Robert and Markov, Nikolay, Measuring the Welfare Costs of EU Accession: The Case of Vat Reform in Bulgaria. Economics of Transition, Vol. 9, No. 2, July 2001. Available at SSRN: https://ssrn.com/abstract=273156