Cross-Country Evidence on the Revenue Impact of Tax Reforms
IMF Working Papers, September 30, 2022
Source details
- Canonical URL
- Cross-Country Evidence on the Revenue Impact of Tax Reforms
Other formats
Bibliographic details
- Authors: Valerio Crispolti, Xuguang Simon Sheng
- Published: September 30, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400222023.001
Scope and objective
- Assess the likely revenue impact of various tax policy changes across a sample of 21 advanced and emerging market economies.
- Use granular information from the IMF Tax Policy Reform Database v.4.0 to inform cross-country evidence on revenue yields of tax reforms.
- Publication: IMF Working Paper No. 2022/199; authors Valerio Crispolti and Xuguang Simon Sheng; date September 30, 2022.
Data and methodology
- Sample: 21 advanced and emerging market economies.
- Data source: IMF Tax Policy Reform Database v.4.0.
- Approach: Analysis based primarily on qualitative information of tax policy changes (i.e., dummy variables); comparison of qualitative results with those obtained using quantitative information on the size of rate changes.
Key findings on revenue yields
- The revenue yield of a tax policy change varies significantly by:
- Tax instrument (e.g., VAT or personal income tax).
- Nature of the change (rate change versus base change).
- Base-broadening changes to the following instruments tend to have more significant and longer-lasting revenue yields than rate changes:
- Personal income taxes
- Corporate income taxes
- Excise taxes
- Property taxes
- Rate changes show relatively more significant revenue impact for:
- Value-added tax (VAT)
- Social security contributions (SSC)
- Asymmetry observed:
- The significance of revenue impacts varies depending on the direction of the tax change (i.e., whether taxes are increased or decreased).
- Robustness on rate measures:
- Revenue yields estimated using qualitative (dummy) indicators for rate measures are not materially different from yields that would be obtained using quantitative information on the size of the change.
Policy implications and recommendations
- Policymakers aiming to raise additional tax revenues without harming growth should consider:
- Favoring base-broadening reforms for personal and corporate income taxes, excise taxes, and property taxes to achieve more significant and persistent revenue gains.
- Considering VAT and SSC rate adjustments when rate changes are the chosen instrument, given their relatively stronger revenue impact for these taxes.
- Accounting for asymmetry: evaluate reforms differently depending on whether they increase or decrease tax liabilities.
- Use of granular cross-country reform evidence (IMF Tax Policy Reform Database v.4.0) can support informed decision-making on viable reforms.
Source: "Cross-Country Evidence on the Revenue Impact of Tax Reforms", IMF Working Paper No. 2022/199 (Valerio Crispolti and Xuguang Simon Sheng), September 30, 2022.
Content in this bundle
- Working Paper