The Political Economy of Revenue-Forecasting Experience From Low-Income Countries

Author/Editor:

Stephan Danninger ; Annette J Kyobe ; M. Cangiano

Publication Date:

January 1, 2005

Electronic Access:

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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 analyzes interference and timeliness in the revenue-forecasting process, using new data on revenue-forecasting practices in low-income countries. Interference is defined as the occurrence of a significant deviation from purely technical forecasts. A theoretical model explains forecasting interference through government corruption. The data broadly supports the model, and the results are robust to alternative explanations. The paper also constructs three indices-transparency, formality, and organizational simplicity-that characterize revenue-forecasting practices, and assesses their effectiveness in producing an upfront-that is, timely-budget envelope. More transparent and simple forecasting processes lead to early budget constraints, while formality has no measurable effect.

Series:

Working Paper No. 2005/002

Subject:

Budget planning and preparation Corruption Crime Expenditure Public financial management (PFM) Revenue administration Revenue forecasting Tax policy

English

Publication Date:

January 1, 2005

ISBN/ISSN:

9781451860214/1018-5941

Stock No:

WPIEA2005002

Pages:

31

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