The VAT complexity, a comparative analysis for Germany and Poland
Purpose – This article aims to examine the complexity of the value added tax (VAT) in Germany and Poland.
Research method – This paper uses a quantitative analysis of the VAT Act and a selected amendment to this Act in Germany and Poland. I consider the German and Polish language versions of the VAT Directive and the Vouchers Directive as a benchmark for comparing VAT complexity. A comparison of a number of law amendments and compliance costs in both countries enhances the analysis.
Results – The VAT complexity in Poland significantly exceeds the complexity of the German VAT system. This is true for all analysed aspects. In Poland, the compliance costs of VAT are significantly higher than in Germany. The Polish VAT law is amended more frequently and is much more comprehensive than its German counterpart. This can be only partially justified by special regulations to combat tax fraud. The high VAT complexity in Poland is also due to the complicated language and structure of the law. Although the German translation of the Vouchers Directive includes more words than the Polish version, the Polish legislator needs about twice as many words as their German counterpart for its implementation.
Originality /value – Tax law is often criticised for its complexity. This study is the first to use the VAT Directive for a comparative study of the VAT complexity and reveals that the Polish legislator uses considerably more text for similar content than their German counterpart.
Article received on 9 March 2020, accepted on 20 May 2020.
Act of 11 March 2004, Ustawa o podatku od towarów i usług, Akty zmieniające, http://prawo.sejm.gov.pl/isap.nsf/DocDetails.xsp?id=WDU20040540535 [date of entry: 03.03.2020].
Act of 21 February 2005, Umsatzsteuergesetz, Bundesgesetzblatt 2005, Teil I, No. 13, 386, as amended.
Act of 22 November 2018, Ustawa o zmianie ustawy o podatku od towarów i usług, Dz. U. 2018, Item 2433.
Bunn D., Asen E., 2019, International Tax Competitiveness Index 2019, Tax Foundation, Washingtion, https://files.taxfoundation.org/20190930115625/2019-International-Tax-Competitiveness-Index.pdf [date of entry: 05.03.2020].
Council of the European Economic Community, 1967a, First Council Directive of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes (67/227/EEC), Official Journal of the European Communities, 1301/67.
Council of the European Economic Community, 1967b, Second Council Directive of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes Structure and procedures for application of the common system of value added tax (67/228/EEC), Official Journal of the European Communities, 1303/67.
Council of the European Economic Community, 1977, Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (77/388/EEC), Official Journal of the European Communities, L145/1.
Council of the European Union, 2006, Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, Official Journal of the European Union, L347/1.
Council of the European Union, 2016, Council Directive (EU) 2016/1065 of 27 June 2016 amending Directive 2006/112/EC as regards the treatment of vouchers, Official Journal of the European Union, L177/9.
Eichfelder S., Vaillancourt F., 2014, Tax compliance costs: A review of cost burdens and cost structures, arqus Discussion Paper, no. 178, pp. 1-42.
European Tax Survey, 2004, European Commission, Working Paper, no. 3.
Existing EU legal framework, 2020, European Commission, https://ec.europa.eu/ taxation_
customs/business/vat/existing-eu-legal-framework_en [date of entry: 04.03.2020].
Hoppe T., Schanz D., Sturm S., Sureth-Sloane C., 2019, Measuring Tax Complexity Across Countries: A Survey Study on MNCs, Accounting for Transparency, Working Paper Series, no. 5, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3469663.
James S., Sawyer A., Wallschutzky I., 2015, Tax simplification: A review of initiatives in Australia, New Zealand and the United Kingdom, “eJournal of Tax Research”, vol. 13, no.1, pp. 280-302.
Klenk F., 2019, Wesen der Umsatzsteuer, Verhältnis von nationalem Recht zum Unionsrecht, Sölch/Ringleb Umsatzsteuergesetz Kommentar, Rn. 1-36.
Krótka historia VAT w Polsce, 2019, Polski Instytut Ekonomiczny, „Policy Paper”, nr 3, pp. 1-34, http://pie.net.pl/wp-content/uploads/2019/03/PIE-Historia-VAT.pdf [date of entry: 04.03.2020].
Lindner C., 2020, Sieben Maßnahmen für eine beherzte Wirtschaftspolitik gegen die Corona-Krise, “Handelsblatt”, https://www.handelsblatt.com/meinung/gastbeitraege/gastkommentar-sieben-massnahmen-fuer-eine-beherzte-wirtschaftspolitik-gegendie-corona-krise/25590196.html [date of entry: 02.03.2020].
OTS, 2020, https://www.gov.uk/government/organisations/office-of-tax-simplification/
about [date of entry: 10.12.2019].
OTS complexity index methodology, 2015, Office of Tax Simplification, https: //assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/438587/OTS_complexity_index_methodology_June_2015.pdf [date of entry: 03.03.2020].
Paying Taxes 2020, 2020a, PWC, https://www.pwc.com/gx/en/services/tax/publications/paying-taxes-2020/explorer-tool.html [date of entry: 05.03.2020].
Paying Taxes 2020, 2020b, PwC, World Bank Group, https://www.pwc.com/gx/en/services/tax/publications/paying-taxes-2020/overall-ranking-and-data-tables.html [date of entry: 03.03.2020].
Paying Taxes methodology, 2020, The World Bank, https://www.doingbusiness.org/en/methodology/paying-taxes [date of entry: 03.03.2020].
Pedersen H., Moerup C., Andersen C., Findsen L., Nielsen J., Lang T., 2013, A review and Evaluation of Methodologies to calculate tax compliance costs, European Commission, Working Paper, no. 40.
Schäfers M., 2010, Union und FDP in der Steuerklemme, “Frankfurter Allgemeine”, https://www.faz.net/aktuell/wirtschaft/wirtschaftspolitik/der-schwere-wegzu-steuervereinfachung-union-und-fdp-in-der-steuerklemme-15556.html [date of entry: 02.03.2020].
Slemrod J., 1984, Optimal Tax Simplification: Toward a Framework for Analysis, Proceedings of the 76th Annual Conference of the National Tax Association, vol. 76, pp. 158-162.
Slemrod J., 2005, The Etiology of Tax Complexity: Evidence from U.S. State Income Tax Systems, “Public Finance Review”, vol. 33(3), pp. 279-299.
Verwaal E., Cnossen S., 2002, Europe’s New Border Taxes, "Journal of Common Market Studies", vol. 40(2), pp. 309-330, DOI: 10.1111/1468-5965.00356.
Warskett G., Winer S., Hettich W., 1998, The Complexity of Tax Structure in Competitive Political Systems, "International Tax and Public Finance", vol. 5, pp. 123-151.
www 1, https://beck-online.beck.de/Dokument?vpath=bibdata%2Fges%2Fustg%2Fcont%2Fustg.aendverz.htm&anchor=Y-100-G-USTG-NAME-AENDVERZ [date of entry: 03.03.2020].
www 2, https://beck-online.beck.de/Dokument?vpath=bibdata%2Fges%2Fewg_rl_2006_112%2Fcont%2Fewg_rl_2006_112.htm&anchor=Y-100-G-EWG_RL_2006_112-NAME-AENDVERZ [date of entry: 03.03.2020].
Article received on 9 March 2020, accepted on 20 May 2020.