DOI: 10.32609/j.ruje.12.174938

Authors: Michael Alexeev, Robert Conrad

Abstract: This paper analyzes the evolution of tax systems in the countries of Central and Eastern Europe and the former Soviet Union during the transition from centrally planned to market economies. Its main objective is to identify the principal directions of tax reform from the beginning of liberalization in 1989 to the stabilization of the basic tax structures by the mid-2000s. The paper combines comparative institutional analysis with country evidence on the reform of the value-added tax, personal and corporate income taxation, excises, tariffs, and property taxation. Particular attention is paid to the role of technical assistance, the sequencing of reforms, and the interaction between tax design and administrative capacity. The analysis shows that pre-reform tax systems were largely incompatible with market allocation and modern revenue administration because they operated mainly as accounting devices within state-controlled economies. During the transition, the VAT became the central instrument of reform, while income taxation had to be redesigned to reflect the growing role of private ownership and the need to coordinate individual and corporate tax treatment. Excise taxation and tariffs were gradually aligned with international practice, and property taxation developed more slowly because of institutional weaknesses in cadastres, valuation, and local administration. Although reform paths differed across countries, the long-run outcome was convergence toward a broadly similar tax model centered on the VAT, income taxation, selective excises, and an emerging local property tax. The paper concludes that successful tax reform required not only legislative change but also administrative modernization, public understanding, and adaptation to country-specific institutional constraints. The experience of the region illustrates the importance of revenue-oriented reform, implementation capacity, and learning by doing in periods of systemic economic transformation.

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