THE STABILISING ROLE OF VAT IN SHAPING REGIONAL BUSINESS CYCLES IN SELECTED CENTRAL EUROPEAN COUNTRIES

Purpose: The aim of the paper is to present the role played by VAT in stabilising the economy. The study presents the formation of business cycles and the relationship between VAT revenue and GDP. A comparison is made of the course of economic fluctuations and changes in VAT revenues in selected Central European countries (part of the Visegrad Group - V4) over the period 2010-2020. Methodology: The methodological basis of the research process and the empirical assessment of the regional business cycles of Poland, the Czech Republic, Slovakia and Hungary were preceded by theoretical analyses of business cycles. The study is based on 52 observations for each region studied. Data was obtained from the Eurostat database. Dynamic indicators reflecting changes in overall economic activity, i.e. quarterly GDP time series, were constructed. The obtained series were subjected to decomposition. Upper and lower turning points, resulting from the growth and decline phases of an economy, were identified. This made it possible to present complete business cycles and their subsequent evaluation in relation to the tax revenues, including VAT, achieved in these economies. Findings: As a result of the research investigation, an assessment of the implemented fiscal stabilisation policies in selected European regions was carried out. Relationships between growth and decline phases in individual economies and the amount of budget revenues from VAT were determined. On this basis, an assessment was made as to whether the countercyclical stabilisation function is being realised. It was not possible to give an unambiguous answer because in some periods VAT had a stabilising function and in others it had a pro-cyclical effect. The most moderate stabilisation policy using VAT was pursued by Slovakia and Hungary. In Poland, VAT performed the stabilising function only episodically. In the Czech Republic, cyclical fluctuations were characterised by the highest amplitude of fluctuations and the VAT fulfilled the stabilising role in selected periods. Originality/value: Evaluation of the implemented stabilisation policy on the impact of VAT on changes in economic activity in the V4 countries.