Empirical analysis of tax revenues, their impact on economic growth of the country - the case of Kosovo

• Author: Teki Shala
• Position: European University of Tirana
• Pages: 122-130

Vol. 1 No. 2

June, 2017

European Journal of Economics, Law and Social Sciences

IIPCCL Publishing, Graz-Austria

ISSN 2519-1284

Acces online at www.iipccl.org

122

Empirical analysis of tax revenues, their impact on economic growth of the

country - the case of Kosovo

Teki Shala

European University of Tirana

Abstract

Main purpose of political makers is the economic growth of a country. Tax policy is o en

mentioned in research as an important determinant of economic growth. This study is of great

importance in the formulation of these policies which would a ect the e ciency of collection

of taxes in order to cover public expenditures, which would have an impact in the growth of

the country's economy. To assess this e ect, we have done a descriptive statistical analysis of

the structure and trends in tax collection in Kosovo from 2005 to 2015. In this research we have

considered how tax policies impact on economic growth by using data from years. The results

from this analysis confi rm that the structure and trends of taxes in Kosovo have contributed

to the growth of public investment growth, contributing directly to GDP growth. Also based

on the fi ndings we have noticed that the share of tax revenues in the country's Gross Domestic

Product was relatively low compared to other countries in the region, refl ecting a low level of

economic development of the country. Moreover, this research highlights some key issues that

policy makers need to take into account in dealing with the more e ective collection and use

of tax revenues to improve economic growth.

Keywords: tax, Kosovo, tax reforms, tax rates, tax policy.

Introduction

Kosovo in the 1990s experienced a total collapse of the economic and fi scal

system. Immediately a er the end of the armed confl ict and a er the declaration

of independence from Serbia, it built a new economic system that enabled it to

raise public revenues for covering public spending (Shala, 2017). Politics and

the fi scal system in Kosovo has its original origin right a er the end of the war

in 1999. Immediately a er the war, a United Nations mission called UNMIK was

installed. This mission was responsible for the governance of the country. Kosovo

from the war emerged economically, without any fi scal system, and the one who

had to take measures to establish it was UNMIK, so on June 25, 1999, Kosovo's fi rst

chief administrator approved Regulation no. 1999/1. This regulation is the highest

legislative act in post-war Kosovo, which regulates issues of state property, fi nance,

banks, and so on. The second important document for the fi scal system in Kosovo

is extracted from the SRSG, Regulation no. 1999/16 on the Establishment of the

Central Fiscal Authority (CFA). Among the fi rst regulations issued by the UN Special

Representative for Kosovo is that on establishing customs and other relevant services

in Kosovo. With the approval of the Regulation on Excise and the Regulation on Sales

Tax, the customs service and the payment of tax and excise duty on import of goods as