{
  "title": "A Deep Dive into Tax Buoyancy: Comparing Estimation Techniques in a Large Heterogeneous Panel",
  "publication": "IMF Working Papers, March 17, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2023/03/20/a-deep-dive-into-tax-buoyancy-comparing-estimation-techniques-in-a-large-heterogeneous-panel-531110",
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  "summary": "This paper provides new empirical evidence on tax buoyancy (tax revenues responsiveness to changes in economic activity) over the period 1990-2020 using a large panel of 185 countries.",
  "sections": [
    {
      "heading": "Overview and scope",
      "content": "- Authors: Antoine Cornevin, Juan S Corrales, Juan Pablo Angel\n- Publication date: March 17, 2023\n- Period covered: 1990-2020\n- Sample: panel of 185 countries\n- Series: Working Paper No. 2023/071, Issue: 071, Volume: 2023, Pages: 72\n- DOI: https://doi.org/10.5089/9798400238376.001\n- ISBN: 9798400238376\n- ISSN: 1018-5941\n- Subject classifications: Corporate income tax, Income tax systems, Personal income tax, Revenue administration, Taxes, Value-added tax\n- Keywords: automatic stabilization, buoyancy coefficient, buoyancy estimate, common correlated effect, comparing estimation technique, Corporate income tax, cross-sectional dependence, DFE estimator, fiscal sustainability, Global, Income tax systems, MG estimator, Personal income tax, Tax buoyancy, tax elasticity, Value-added tax"
    },
    {
      "heading": "Key findings",
      "content": "- The study provides new empirical evidence on tax buoyancy (tax revenues responsiveness to changes in economic activity) using a large heterogeneous panel for 1990-2020.\n- Long-term buoyancy:\n  - Results broadly confirm the main body of the literature on long-term buoyancy hovering around one.\n- Short-term buoyancy:\n  - Evidence of lower estimates for short-term buoyancy relative to previous literature.\n  - Implication: limited automatic stabilization power of taxes in the short run.\n- Robustness and controls:\n  - In addition to changes in tax rates, the authors introduce novel control variables for tax exemptions and bases to disentangle discretionary from automatic tax revenue changes.\n  - Marginal changes in results when controlling for policy actions suggest that, on average, the economic cycle does not necessarily influence tax reforms."
    },
    {
      "heading": "Methodological comparison",
      "content": "- The study compares short-term and long-term buoyancy coefficients for total tax revenues and different individual taxes by reviewing and contrasting a range of estimators.\n- Estimators and methodological terms highlighted in the paper include:\n  - common correlated effect\n  - DFE estimator\n  - MG estimator\n  - approaches addressing cross-sectional dependence"
    },
    {
      "heading": "Policy-relevant implications",
      "content": "- Short-term policy design:\n  - Lower short-term buoyancy estimates imply a reduced automatic stabilization role for tax instruments in economic downturns and recoveries.\n- Tax policy assessment:\n  - Introducing controls for tax exemptions and tax bases helps distinguish discretionary policy actions from cyclical revenue movements, informing better policy diagnostics.\n- Fiscal sustainability and reform timing:\n  - The finding that the economic cycle does not necessarily influence tax reforms on average suggests that policymakers may not systematically time reforms to the cycle; this has implications for designing fiscal rules and reform strategies."
    },
    {
      "heading": "Publication and access notes",
      "content": "- Format: IMF Working Papers\n- The paper is positioned as research in progress intended to elicit comments and encourage debate.\n\nIMF Working Paper No. 2023/071 — A Deep Dive into Tax Buoyancy: Comparing Estimation Techniques in a Large Heterogeneous Panel (Antoine Cornevin, Juan S Corrales, Juan Pablo Angel), March 17, 2023.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2023/03/20/a-deep-dive-into-tax-buoyancy-comparing-estimation-techniques-in-a-large-heterogeneous-panel-531110"
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    "Authors: Antoine Cornevin, Juan S Corrales, Juan Pablo Angel",
    "Published: March 17, 2023",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400238376.001",
    "Authors: Antoine Cornevin, Juan S Corrales, Juan Pablo Angel",
    "Publication date: March 17, 2023",
    "Period covered: 1990-2020",
    "Sample: panel of 185 countries",
    "Series: Working Paper No. 2023/071, Issue: 071, Volume: 2023, Pages: 72",
    "DOI: https://doi.org/10.5089/9798400238376.001",
    "ISBN: 9798400238376",
    "ISSN: 1018-5941",
    "Subject classifications: Corporate income tax, Income tax systems, Personal income tax, Revenue administration, Taxes, Value-added tax",
    "Keywords: automatic stabilization, buoyancy coefficient, buoyancy estimate, common correlated effect, comparing estimation technique, Corporate income tax, cross-sectional dependence, DFE estimator, fiscal sustainability, Global, Income tax systems, MG estimator, Personal income tax, Tax buoyancy, tax elasticity, Value-added tax",
    "The study provides new empirical evidence on tax buoyancy (tax revenues responsiveness to changes in economic activity) using a large heterogeneous panel for 1990-2020.",
    "Long-term buoyancy:",
    "Short-term buoyancy:",
    "Robustness and controls:",
    "The study compares short-term and long-term buoyancy coefficients for total tax revenues and different individual taxes by reviewing and contrasting a range of estimators.",
    "Estimators and methodological terms highlighted in the paper include:",
    "Short-term policy design:",
    "Tax policy assessment:",
    "Fiscal sustainability and reform timing:",
    "Format: IMF Working Papers",
    "The paper is positioned as research in progress intended to elicit comments and encourage debate.",
    "**Working Paper**"
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