Balkan Country Fiscal Competition – VAT Differential Incentives under The EU Accession Attempt”.

The Balkan countries while trying to attract foreign investors from one hand and implement a new social and economic model in the other one with the main scope to promote the progressive taxation and social protection programs designed to increase incomes and reduce wealth inequalities as integrative part of their European dream have explored the value added tax (VAT). Properly the later constitutes the object of this study by focusing on revenues on GDP ratio and trying to understand the aspired effects on the above mentioned goals. By this way a fixed effects panel regression model is explored regarding Albania, Kosovo, Macedonia, Serbia, Montenegro and Bosnia-Herzegovina as per 1991-2014 period at 95% confidence level aiming to analyze the impact of variables that vary over time between the countries with a special regard to the VAT (which is a bias) impact on government tax revenues, supported by a linear regression analysis in each single neighboring country. The first analysis confirms that the predictors which significantly impact the government tax revenues/GDP ratio are: VAT, Openness ratio, GDP per capita, Agriculture/GDP ratio, remittances and external debt. Which in general explain the 73.6% of government tax revenues variance and where 68% of it is attributed to the differences across panels. In following the only country in which VAT has a statistically significant positive impact on government tax revenues/GDP ratio with 29.6% resulted Albania, followed from GDP per capita as the most common variable with a positive impact on governmental tax revenues /GDP ratio.