Tax reforms in the new European Union member states (EU-13) and economic growth

The aim of this paper is to discuss and analyze the effects on economic growth of tax reforms implemented during the recent financial crisis in the newer European Union member states (EU-13). Tax systems of the EU-13 member states are relatively new and generally much simpler than those of the older European Union member states (EU-15), but not necessarily more efficient. Also, EU-13 member states are more consumption oriented, and therefore can promote economic growth, according to some authors. Having in mind the fact that the financial crises has influenced tax systems of the EU-13 member states with differing intensity, the EU-13 member states have applied varying tax reform measures to cope with the consequences of the crises. Although the measures used in certain states were quite extensive and include all possible spheres of tax systems, we will analyze only those conducted in the system of personal income tax (PIT), corporate income tax (CIT) and value added tax (VAT). Even though growth performance is seen through long-run analysis, here we are considering changes in growth in the short to medium run. This framework is chosen in order to detect which tax policies had an impact on growth, since austerity policies did not yield favorable results. Since preliminary results of this analysis are mixed, further analysis is done in order to see why countries like Poland were a success story, given their growth performance in the crisis, while other countries suffered negative growth rates for years. We believe that, among other things, taxation policies played a crucial role in enhancing good or bad growth performance during the crisis.