Value Added Tax Impacton Economic Activity: Importance, Implication and Assessment –The Romanian Experience

Mariana MUREȘAN, Delia DAVID, Ladislau ELEK, Florin DUMITER

Abstract


This paper studies the impact of VAT upon the economic activity in Romania. By developing a new mathematical model we offer several dy-namic and effcient possibilities for observing the modifcations caused by the temporary reduc-tion of taxes upon the personal incomes which suggest that the resulting additional incomes are often saved and less consumed. Analyzing several temporary reductions in incomes, the model describes also a scheme regarding the developments of economic growth. Based on this scheme, are revealed the different arrangements in which a present economic activity infuences a future one. According to the proposed model, it is highlighted that the national income increases as a response to the aggregated demand.

Keywords


aggregate demand, indirect tax, investments, infation, output.

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