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Assessing the Variability of Tax Elasticities in Lithuania

Author/Editor: Poghosyan, Tigran
Authorized for Distribution: November 1, 2011
Electronic Access: Free Full Text (PDF file size is 1,150KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper quantifies the variability of tax elasticities in Lithuania using two alternative methods: rolling regressions and pooled mean group estimator. The analysis is motivated by the systematic variation of tax revenues observed over the economic cycle in the recent past. Both methods confirm that tax elasticities moved with the cycle, which can be attributed to the procyclical tax compliance tendencies and structural composition effects across tax bases. Comparison of VAT revenue gaps across Baltic countries during the recent recovery suggests that tax revenues rebounded fastest in Estonia, followed by Lithuania and Latvia. Overall, the results of the study emphasize the importance of accounting for cyclical variation in tax elasticities when making short-term tax revenue projections.
 
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Series: Working Paper No. 11/270
Subject(s): Baltics | Business cycles | Cross country analysis | Direct taxation | Estonia | Indirect taxation | Latvia | Tax revenues | Tax systems | Value added tax | Lithuania
Author's keyword(s): Tax elasticity | economic cycles | Lithuania.
 
English  
    Published:   November 1, 2011        
            Format:   Paper
    Stock No:   WPIEA2011270   Pages:   16
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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