The political economy of tax projections

Bischoff, Ivo; Gohout, Wolfgang

doi:10.1007/s10797-008-9103-y

Cited by 37 publications

(37 citation statements)

References 28 publications

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“…Recent studies analyse the influence of political factors (Bischoff andGohout, 2010, Büttner andKauder, 2011,). Election-motivated politicians may try to manipulate revenue forecasts to increase the probability of re-election.…”

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confidence: 99%

On the Rationality of Medium-Term Tax Revenue Forecasts: Evidence from Germany

Breuer

2015

Jahrbücher Für Nationalökonomie Und Statistik

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In the present paper I examine tax revenue projections in Germany over the period 1968 to 2012 with a focus on forecasting rationality. I show that tax revenue forecasts for the medium-term are upward biased. Overoptimistic revenue projections are particularly pronounced after the German reunification and reflect upward-biased GDP projections in this period. The predicted tax-GDP-ratio appears to be upward biased, as well. The forecasts are likely to overestimate tax revenues if the predicted tax-GDP-ratio exceeds its structural level of approximately 22 ½ percentage points. The results also indicate that forecast errors of short-term projections for the current year exhibit serial correlation. It is conceivable that the specific institutional setting can explain this non-rational behaviour to some extent. Terms of use: Documents in EconStor mayJEL Code: E62, H20, H68.

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confidence: 99%

On the Rationality of Medium-Term Tax Revenue Forecasts: Evidence from Germany

Breuer

2015

Jahrbücher Für Nationalökonomie Und Statistik

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“…The effect of elections has been assessed in numerous studies. While Paleologou (2005), Bischoff and Gohout (2010) and Couture and Imbeau (2009) find a positive and significant effect of elections on tax revenue budgeting errors in UK, western German states and Canadian provinces respectively, Goeminne et al (2008) and Ohlsson and Vredin (1996) do not find any significant effect in the case of Flemish municipalities and Sweden. These mixed evidence are interesting since they tend to show that elections seems to matter at the national and state levels but not at the local level.…”

Section: Empirical Literature On Revenue Projectionsmentioning

confidence: 75%

“…1 Then, since the late 90's until now, an important number of studies have been performed for Canada and European countries. While the studies by Campbell and Ghysels (1997) and Couture and Imbeau (2009) address the case of Canada, the case of European countries is analysed by Ohlsson and Vredin (1996) for Sweden, Paleologou (2005) for UK, Goeminne et al (2008) for Flemish municipalities and Bischoff and Gohout (2010) for West German states. Given the purpose of the current study, we particularly focus on the studies addressing the effect of political variables on tax revenue projections.…”

Section: Empirical Literature On Revenue Projectionsmentioning

confidence: 99%

“…Similarly, Cassidy et al (1989) Finally, Goeminne et al (2008) and Bischoff and Gohout (2010) assess the effect of political fragmentation on tax revenue forecasting errors. While Bischoff and Gohout (2010) do not find any significant effect of political fragmentation, 3 Goeminne et al (2008) find a negative (and non linear) significant effect of fragmentation on tax revenue projections in municipalities, i.e.…”

Section: Empirical Literature On Revenue Projectionsmentioning

confidence: 99%

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Incentive Effects of Fiscal Rules on the Finance Minister's Behaviour: Evidence from Revenue Projections in Swiss Cantons

Chatagny

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. been shown that revenue prediction errors have a direct impact on fiscal deficits. In the current paper we explore the relationship between the ideology of the finance minister and tax revenue projection errors and assess how the stringency of fiscal rules does alter this relationship. We use a panel dataset on 26 Swiss cantons over the period 1980-2007 as well as a new dataset on 99 finance ministers at the cantonal level. We find a rather counter-intuitive positive relationship between the ideology of the finance minister and tax revenue projection errors in the sense that a more left wing finance minister produces relatively more conservative forecasts. We also find that fiscal rules reduce the effect of ideology on tax revenue projection errors. These results suggest that left wing finance ministers need to curb deficits relatively more in order to signal the same level of competence than a right wing finance minister to the voters. It also suggests that fiscal rules render the signal less informative to the voters and thereby reduce the incentive for left wing finance ministers to be more conservative in their projections. Terms of use: Documents in

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“…Bischoff and Gohout [2] found some evidence of upward bias in tax projections in West German states. Buettner and Kauder [3], also working with data from Germany, found that Federal tax revenue forecasts were typically unbiased but still influenced by government.…”

Section: Forecasting Uk Tax Revenuesmentioning

confidence: 98%

UK Taxes and Tax Revenues: Composition and Trends

Ghodsi¹,

Webster²

2018

Taxes and Taxation Trends

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This study looks at the composition and trends of tax revenues in the UK. It provides a brief overview of the rather complicated system of different taxes in the UK. Three main taxespersonal income tax, national insurance contributions (NICs) and value added tax (VAT)-are shown to account for about three quarters of all tax revenues and that this has been stable over a period of time. In comparison to other countries the UK is similar in its tax composition to both the US and France, where the same three types of tax dominate revenues. It is much less similar to both Malaysia and Argentina. The study examines monthly UK tax revenues for these three taxes, using econometrically estimated trends. It finds that, in constant price terms, revenues have grown slowly and steadily over time, broadly keeping pace with growth in real GDP. Tax revenue forecasting in the UK is mainly undertaken by an independent body which publishes forecasts at the level of receipts for individual taxes. This considerably reduces the risk of political bias in these revenue forecasts.

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The political economy of tax projections

Abstract: Tax projections, Political parties, Budget process, Public deficits, Fiscal discipline, Fiscal transparency, H 72, D 72,

Cited by 37 publications

References 28 publications

On the Rationality of Medium-Term Tax Revenue Forecasts: Evidence from Germany

On the Rationality of Medium-Term Tax Revenue Forecasts: Evidence from Germany

Incentive Effects of Fiscal Rules on the Finance Minister's Behaviour: Evidence from Revenue Projections in Swiss Cantons

UK Taxes and Tax Revenues: Composition and Trends

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