Why Financial Behavior Matters for Tax Collection: Evidence from Central and Eastern European Countries
Why Financial Behavior Matters for Tax Collection: Evidence from Central and Eastern European Countries

Summary/Abstract: In recent years, Central and Eastern European (CEE) countries have faced increasing fiscal pressures generated by overlapping structural challenges, including accelerated inflation, heightened geopolitical uncertainty, and a reallocation of public expenditures toward strategic priorities such as defense and social protection. In this context, improving tax revenue performance has become a critical concern for governments seeking to preserve fiscal sustainability while maintaining social cohesion. At the same time, the digitalization of public administrations, reflected in the expanding use of e-government platforms, has been widely promoted as a key instrument for improving tax compliance and transparency.This paper provides an exploratory investigation into whether digitalization alone is associated with enhanced tax revenue performance, or whether its effectiveness may also depend on citizens’ household financial adjustment behavior and the broader institutional environment. Using annual data for Central and Eastern European countries over the period from 2014 to 2024, the study combines descriptive statistics, correlation analysis, and a dynamic VAR framework applied to regional average series.The empirical results suggest that increases in e-government usage do not generate an immediate or persistent improvement in tax revenues relative to GDP, indicating the absence of a stable automatic effect. By contrast, changes in household saving behavior appear more closely aligned with improvements in fiscal outcomes, consistent with the view that household financial adjustment behavior may play a complementary role alongside digital tools. Overall, the exploratory findings suggest that digitalization is not a stand-alone solution for improving tax revenue performance; rather, its effectiveness is likely to be conditional on the behavioral and institutional context in which it is deployed.

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