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An examination of the IFS corporation tax forecasting record

Author

Listed:
  • Suman Basu

    (Institute for Fiscal Studies)

  • Carl Emmerson

    (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • Christine Frayne

    (Institute for Fiscal Studies and European Commission (formerly IFS staff))

Abstract

This paper examines the corporation tax forecasting techniques used by the Institute for Fiscal Studies. For current year forecasts a judgemental forecast is found to have performed better than relying solely on a simple model or information on the receipts available so far in the current financial year. For longer time horizons the judgemental forecast has performed slightly less well than the modelled forecast. While forecasts made later in the financial year have led to more accurate estimates of receipts in the current year no evidence is found that this has improved the accuracy of longer run forecasts. In the short term inaccuracies in the modelling process are found to be more important than errors in forecasting growth in corporate profits. However the latter is still an important component of errors and one that grows substantially in relative importance as the forecast horizon increases.

Suggested Citation

  • Suman Basu & Carl Emmerson & Christine Frayne, 2003. "An examination of the IFS corporation tax forecasting record," IFS Working Papers W03/21, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:03/21
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    File URL: http://www.ifs.org.uk/wps/wp0321.pdf
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    References listed on IDEAS

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    1. Chris Giles & John Hall, 1998. "Forecasting the PSBR outside government: the IFS perspective," Fiscal Studies, Institute for Fiscal Studies, vol. 19(1), pages 83-100, February.
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    Cited by:

    1. Hovick Shahnazarian & Martin Solberger & Erik Spånberg, 2017. "Forecasting and Analysing Corporate Tax Revenues in Sweden Using Bayesian VAR Models," Finnish Economic Papers, Finnish Economic Association, vol. 28(1), pages 50-74, Autumn.
    2. Creedy, John & Gemmell, Norman, 2008. "Corporation tax buoyancy and revenue elasticity in the UK," Economic Modelling, Elsevier, vol. 25(1), pages 24-37, January.
    3. Saeed Ahmed, 2006. "Corporate Tax Models: A Review," SBP Working Paper Series 13, State Bank of Pakistan, Research Department.
    4. Carl Emmerson & Christine Frayne & Sarah Love, 2004. "Updating the UK's code for fiscal stability," IFS Working Papers W04/29, Institute for Fiscal Studies.
    5. Martin Keene & Peter Thomson, 2007. "An Analysis of Tax Revenue Forecast Errors," Treasury Working Paper Series 07/02, New Zealand Treasury.

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    More about this item

    Keywords

    Corporate Tax; Forecasting; government revenue;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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