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Simplify and Improve: Revisiting Bulgaria's Revenue Forecasting Models

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  • Fabio Ashtar Telarico

Abstract

In the thirty years since the end of real socialism, Bulgaria has gone from having a rather radically 'different' tax system to adopting flat-rate taxation with marginal tax rates falling from figures as high as 40% to 10% for both the corporate and personal income tax. Crucially, the econometric forecasting models in use at the Bulgarian Ministry of Finance hinted at an increase in tax revenue compatible with the so-called 'Laffer curve'. Similarly, many economists held the view that revenues should increase. However, reality fell short of those expectations based on forecasting models and rooted in mainstream economic theory. Thus, this paper asks whether there are better-performing forecasting models for personal and corporate income tax revenues in Bulgaria that are readily implementable and overperform the ones currently in use. After articulating a constructive critique of the current forecasting models, the paper offers readily implementable, transparent alternatives and proves their superiority.

Suggested Citation

  • Fabio Ashtar Telarico, 2022. "Simplify and Improve: Revisiting Bulgaria's Revenue Forecasting Models," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 633-654.
    • Handle: RePEc:bas:econth:y:2022:i:6:p:633-654
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    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
    • N54 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Europe: 1913-

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