Laffer curve - a comparative study across the V4 (Visegrad) countries

The essence of the Laffer curve is simple - it represents the relationship between the tax rate imposed by a government and the tax revenues. Tax revenues are the product of the tax rate and the tax base. For this article and based on the theory that underpins the Laffer curve, the application thereof is generalized, and the economic growth rate adopted instead of tax revenues. The purpose of this article is, on the basis of the theory that underpins the Laffer curve, to determine the optimal tax rate in the V4 countries and to compare the results across these countries. Data on the GDP growth rates and tax rates in the Visegrad countries (V4 countries) for the period 1995-2017 are collated and the regression method applied to them to determine the suitable parameter values. For this study, the V4 countries are looked at as a whole. According to the conclusion drawn, it can be stated that the relationship between the GDP growth rate and the tax rate is significant for the V4 countries, and that the parameters of the regression equations conform to the expected symbols. This implies that the Laffer curve conforms with the overall situation in the V4 countries. Further analysis of the optimal tax rate and the situation in each country showed that Poland and the Slovak Republic have the more appropriate tax rates, whereas the Czech Republic and Hungary need to appropriately adjust their tax rates.