TAX EVASION IN EUROPE: CAUSES AND CONSEQUENCES
DOI:
https://doi.org/10.2478/eoik-2025-0016Abstract
Corruption remains a perennial problem in Eastern Europe, especially
in countries that have a socialist influence. This study examines the
drivers, the effects on economic growth, and the measures that gov-
ernments take to address this vice in these economies. Considering
the empirical evidence and case studies from Bulgaria, Romania, and
Hungary, this study finds that factors that have led to tax evasion are
archaic taxation systems, high taxes, and inefficiency in the adminis-
trative systems. Descriptive and inferential statistics show that high
taxes and unemployment have a positive relationship with tax evasion
while GDP has a negative non-significant relationship. There is a de-
crease in government revenue which implies that fewer services will
be provided to the public and increased social and economic disparity.
Previous approaches to combating evasion include the simplification
of the tax code and better enforcement, which have produced only
limited success. The study also recommends that governments should
broaden the policies to enhance the efficiency of the tax system by
simplifying it, improving the mechanisms of compliance, and creating
an investment-friendly environment. Thus, this research provides a
historical and economic analysis of tax evasion and its impact on tran-
sitional economies and provides recommendations for how to reduce
the effects of tax evasion on development. These results are valuable
for policymakers who intend to improve fiscal sustainability and eco-
nomic development in the Eastern European region.
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