Effects Of Taxation On Corruption In The European Union

The state by forming a tax system and by determining its numerous factors, such as the tax regulations clarity, the level of official’s salaries, corruption penalization, administration transparency and so on, affects the degree of corruption in a particular country. Research on this relationship, both in Croatia and in other countries, is relatively scarce. Therefore, the purpose of this paper is to examine the impact of the tax system i.e. its complexity and the ratio of direct and indirect taxes, on corruption, on the sample of EU member states over the last decade. The results obtained by linear regression analysis show that countries with more complex tax systems face a higher level of corruption, as well as those countries that rely more on indirect taxes. Thus, the research results indicate that, in order to reduce corruption level, the tax system should be simplified, and the importance of direct taxes increased, while not neglecting the economic and redistributive effects of such changes.