Tax at a Glance for ECA Countries

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.