Tax at a Glance for ECA Countries

Abstract

The tax-at-a-glance provides an overview
 of the tax policy and tax administration system as well as
 main trends in tax reform for each Europe and Central Asia
 (ECA) country. In the ECA region, two historic transitions
 since 1990 (a political transition from totalitarianism
 toward democracy and an economic transition from socialism
 toward free market systems) required a fundamental change in
 the role of the state, from controlling virtually all major
 economic assets to providing public goods and facilitating a
 largely privately-owned competitive economy. This change in
 the role of the state required a major downsizing and
 reorientation of public spending and a complete overhaul of
 tax policy and administration. Formidable challenges existed
 in setting up an efficient and fair tax system in ECA.
 First, voluntary compliance and self-filing, two important
 pillars in a modern tax system, were completely absent.
 Second, tax evasion reached a high level due to the
 inefficiency and weak management of the tax administration.
 Third, income was unevenly distributed within ECA countries.
 The economic and political power of rich taxpayers prevented
 tax reforms and this partially led to inefficient and unfair
 tax systems. Fourth, tax administration was very
 inefficient, with a poorly educated and poorly trained
 staff. Modern technologies had not been fully deployed in
 tax offices. Due to administrative and financial
 limitations, statistical and tax offices have difficulty in
 providing reliable statistics. Furthermore, low level of
 transparency in several tax administrations in ECA countries
 makes it harder to collect accurate information on tax
 performance. The poor quality of data often prevents
 policymakers and economists from assessing potential
 problems and challenges to existing tax systems.