Publication detail

Dynamic Elasticities of Tax Revenue: Evidence from the Czech Republic

Author(s): prof. PhDr. Tomáš Havránek Ph.D.,
doc. PhDr. Zuzana Havránková Ph.D.,
PhDr. Jiří Schwarz Ph.D.,
Type: IES Working Papers
Year: 2015
Number: 23
Published in: IES Working Papers 23/2015
Publishing place: Prague
Keywords: Tax revenue, tax base, elasticity, error correction models
JEL codes: H24, H25, H27
Suggested Citation: Havranek T., Irsova Z., Schwarz J. (2015). “Dynamic Elasticities of Tax Revenue: Evidence from the Czech Republic” IES Working Paper 23/2015. IES FSV. Charles University.
Grants: DYME – Dynamic Models in Economics
Abstract: Key parameters for the modeling of public finances are tax revenue elasticities with respect to tax bases. Yet the existing studies estimating these elasticities for emerging countries disregard the effects of tax reforms on tax revenue, which renders their estimates inconsistent. We use a unique data set from the Czech Republic to account for the effects of reforms and estimate both short- and long-run tax revenue elasticities. Our results suggest that the long-run elasticities are 1.4 for wage tax, 0.9 for value added tax, and 1.7 for profit tax. The adjustment process for value added tax is fast, but for the remaining two categories it is important to distinguish between the short- and long-run elasticities: the initial response of revenue to changes in the bases is weak. In the case of wage tax it takes half a year for the elasticity to surpass unity.
Downloadable: wp_2015_23_havranek_irsova_schwarz




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