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Prepared by Nicolas End and Mick Thackray.
This measure provides a broad indicator of the efficiency of each tax as being the amount of additional revenue produced per percentage point of the top rate. Its value is a function of (i) the coverage of the tax base by tax policy and degree of progressivity, (ii) the composition of GDP and distribution of incomes/expenditure; and (iii) the level of taxpayer compliance.
Formally, C-efficiency is computed as follows:
Especially when refunds are restricted.
An alternative explanation is a change in the composition of GDP in Albania, for example increasing consumption of exempted commodities. This possibility will be covered by the upcoming RA-GAP study of the VAT gap.