An Analysis of Tax Forecasting Errors in Ireland
This paper examines the tax revenue forecasting performance of the Department of Finance over the period 1997-2014. While the general forecasting framework used reflects standard international practice, forecasting errors are relatively large by international standards. In almost all cases, we find no evidence of bias in the forecasts when considering the major tax heads over various forecast horizons. A decomposition of the forecast errors reveals substantial contributions from sources other than errors in forecasting the macroeconomic environment or in estimating the previous year’s revenue outturn. This suggests that a formal review of specific procedures and assumptions by the Department could yield further improvements in forecasting performance. An innovative exercise examining the routine use of judgement by the Department to adjust the outcome of forecasting equations indicates that this practice often improved the quality of the forecasts.
References listed on IDEAS
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- Thiess Buettner & Bjoern Kauder, 2010.
"Revenue Forecasting Practices: Differences across Countries and Consequences for Forecasting Performance,"
Institute for Fiscal Studies, vol. 31(3), pages 313-340, September.
- Thiess BÃ¼ttner & BjÃ¶rn Kauder, 2009. "Revenue Forecasting Practices: Differences across Countries and Consequences for Forecasting Performance," CESifo Working Paper Series 2628, CESifo Group Munich.
- Jeffrey A. Frankel & Jesse Schreger, 2012. "Over-optimistic Official Forecasts in the Eurozone and Fiscal Rules," NBER Working Papers 18283, National Bureau of Economic Research, Inc.
- Frankel, Jeffrey A. & Schreger, Jesse, 2012. "Over-Optimistic Official Forecasts in the Eurozone and Fiscal Rules," Working Paper Series rwp12-041, Harvard University, John F. Kennedy School of Government.
- Morris, Richard & de Castro Fernández, Francisco & Jonk, Steven & Kremer, Jana & Linehan, Suzanne & Marino, Maria Rosaria & Schalck, Christophe & Tkačevs, Olegs, 2009. "Explaining government revenue windfalls and shortfalls: an analysis for selected EU countries," Working Paper Series 1114, European Central Bank.
- Diarmaid Addison-Smyth & Kieran McQuinn, 2010. "Quantifying Revenue Windfalls from the Irish Housing Market," The Economic and Social Review, Economic and Social Studies, vol. 41(2), pages 201-233.Full references (including those not matched with items on IDEAS)
- Addison-Smyth, Diarmaid & McQuinn, Kieran & O' Reilly, Gerard, 2009. "Quantifying Revenue Windfalls from the Irish Housing Market," Research Technical Papers 10/RT/09, Central Bank of Ireland.
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