The Dynamics Of Value Added Tax Revenue, Shadow Economy,And Fiscal Deficit: Moderating Effect Of Government Effectiveness

Abstract

This study aims to determine the simultaneous and partial effects of the shadow economy and fiscal deficit on Value Added Tax (VAT) revenues in 14 G20 member countries using Government Effectiveness as moderation. Using quantitative descriptive research methods, data processing is done by panel data regression analysis and the econometric model used is Panel Corrected Standard Errors (PCSE). The results showed that the shadow economy, fiscal deficit, and the interaction of shadow economy and fiscal deficit with government effectiveness simultaneously have a significant effect on tax revenue in G20 member countries. Partially, the results show that the shadow economy has a negative and significant effect on VAT revenue, while the fiscal deficit has no effect on VAT revenue. The results of the interaction with government effectiveness weaken the negative and significant effect of the shadow economy on VAT revenue, and the interaction between fiscal deficit and government effectiveness has a positive and significant effect on VAT revenue in G20 member countries. Based on the results of this study, in an effort to optimize VAT revenue, the government needs to pay attention to the shadow economy, fiscal deficit, and government effectiveness. Effectivity of government Good can increase the potential for tax revenue in the shadow economy while optimizing the fiscal deficit.