Effects of the value added tax reform on the economy of Republic of Macedonia

Angelovski, Filip

In the year 2000 the old turnover tax was replaced and the value added tax was introduced. The aim of the bachelor thesis is to explore the impact of the value added tax on the economy in the Republic of Macedonia. The research explores the effects from this reform on the GDP as the most important measurement for the economic growth and the inflation rate as the indicator for the price change. For that reason, Vector Autoregressive (VAR) model is applied from the period 1995 to 2016 with yearly data from VAT and turnover tax revenues, GDP growth and inflation rate. In addition to that empirical analysis, Granger test and forecasting technique are used to explore causality and to predict the future behavior. Moreover, the impact of the VAT revenues on the state’s budget of the Republic of Macedonia is investigated. The Ordinary least squares (OLS) model is used analyzing the time series data that unites the revenues from the turnover tax and the VAT under single variable on yearly basis from 1994 to 2016. The Chaw test is implemented in the OLS model to find the structural break that is caused in the revenues by the implementation of the VAT. In the thesis the topics of tax evasion and the role of the Public Revenue Office are discussed as well.

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