Value Added Tax in Poland ? Basis of Functioning and its Efficiency

The aim of this article is to present the basis of functioning of VAT in Poland as well as to examine its efficiency. The paper consists of three parts. The first part deals with the most important theoretical aspects of VAT in the analyzed country, including design issues and small-scale taxpayers treatment. Then, the VAT revenue to government revenue ratio is examined and compared with other European countries. In the next part of the article, the efficiency of VAT in Poland between 2004 and 2012 is analyzed. Using VRR as a measure it has been proved that during the analyzed period a significant amount of potential VAT was not collected. It suggests that there is a potential for raising additional revenue by improving the VAT performance in Poland. There are various different ways of improving VAT performance in Poland which is then discussed.