Transformations  in
Business & Economics

FISCAL ASPECTS OF TAX SYSTEM RESTRUCTURING IN CENTRAL AND EASTERN EUROPE
Arkadiusz Żabinski, Michal Sosnowski

ABSTRACT. During the period of 1995-2012, Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovakia and Slovenia transformed their respective tax systems. The main drivers of the transformation were fiscal factors. In pursuit of efficient sources of revenues for their national budgets, these economies had to tune their tax system structures to the specifics of post-socialist economies under transformation. This paper describes the direct and indirect taxation transformation paths followed by the countries of Central and Eastern Europe that affected implementation of the fiscal principles and functions of their respective tax systems. Research shows a large number of similarities in the selection of instruments that have significantly changed the way in which the tax systems operate. Thanks to their application of solutions novel to Europe, e.g. the deep cuts in tax rates or the introduction of flat-rate taxes, the ex-Eastern Block members of the EU have set trends for the entire EU and become a model followed by other post-socialist countries.

KEYWORDS: fiscal policies, tax system, public revenue, income tax, indirect taxation.

JEL classification: E62, H20, H21, H25.