Assessing the Variability of Tax Elasticities in Lithuania

November 1, 2011

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Tigran Poghosyan. Assessing the Variability of Tax Elasticities in Lithuania, (USA: International Monetary Fund, 2011) accessed November 21, 2024

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.

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

Publication Details

Pages:

16
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/270
Stock No:

WPIEA2011270
ISBN:

9781463925222
ISSN:

1018-5941

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