Assessing the Variability of Tax Elasticities in Lithuania
IMF Working Papers, November 1, 2011
Source details
- Canonical URL
- Assessing the Variability of Tax Elasticities in Lithuania
Other formats
Bibliographic details
- Authors: Tigran Poghosyan
- Published: November 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463925222.001
Overview
- Paper objective: Quantify the variability of tax elasticities in Lithuania using two alternative methods: rolling regressions and pooled mean group estimator.
- Motivation: Systematic variation of tax revenues observed over the economic cycle in the recent past.
- Primary emphasis: Importance of accounting for cyclical variation in tax elasticities when making short-term tax revenue projections.
Methods
- Two estimation approaches used:
- Rolling regressions.
- Pooled mean group estimator.
Key Findings
- Both methods confirm that tax elasticities moved with the economic cycle.
- Attributed drivers of cyclical movement:
- Procyclical tax compliance tendencies.
- Structural composition effects across tax bases.
- Comparative recovery dynamics for VAT revenue gaps across Baltic countries:
- Tax revenues rebounded fastest in Estonia, followed by Lithuania and Latvia.
Policy Implications and Recommendations
- Short-term tax revenue projections should explicitly account for cyclical variation in tax elasticities.
- Revenue forecasting and fiscal planning should consider:
- Variations in tax compliance over the cycle (procyclical compliance).
- Structural composition effects across different tax bases (e.g., VAT, corporate income tax, consumption).
Subject Areas and Keywords
- Subject: Corporate income tax, National accounts, Private consumption, Revenue administration, Tax elasticity, Tax policy, Taxes, Value-added tax
- Keywords: Baltics, Corporate income tax, economic cycles, Lithuania, Private consumption, revenue gap, tax elasticity, tax revenue, Value-added tax, VAT, VAT collection, VAT elasticity, VAT revenue collection, VAT revenue growth, WP