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Inflation, Lags in Collection, and the Real Value of Tax Revenue (L'inflation, les retards de recouvrement et la valeur réelle des recettes fiscales) (Inflación, desfases en la recaudación y valor real de los ingresos tributarios)

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  • Vito Tanzi

    (International Monetary Fund)

Abstract

The literature dealing with the impact of inflation on tax revenue has assumed that two conditions hold, namely, that (1) taxes are paid as they accrue, and that (2) tax systems are generally elastic. When these two assumptions are valid, inflation is likely to lead to increases in real tax revenue. On the other hand, when the assumptions do not hold--that is, when a country is characterized by substantial lags in tax collection or when its tax system has an elasticity close to one--the consequences of inflation can be quite different. This alternative situation applies to most developing countries and may even apply to some industrial countries. In this paper, the problem of lags in collection is analyzed in a theoretical framework, which is subsequently used to explain the behavior of revenue during the recent Argentine inflation. The theoretical part shows how lags in payments and rates of inflation interrelate to affect real tax revenue. Assuming that the tax system has an elasticity not too different from one, a matrix can be developed that shows by how much real revenue falls when inflation (per month) increases by a certain amount and the average lag (in months) has a given value. The matrix also shows the gain in real revenue associated with a given decrease in the length of the collection lag. In addition, a mathematical appendix shows how the lag and the rate of inflation interrelate with the elasticity of the tax system. This analysis is finally applied to Argentina. Defining Ti as the proportion of 1974 total tax revenue generated by a particular tax (or group of taxes), and Li as the lag between the time when the liability for that tax payment was created and the time when the payment was actually made, the tax system's total lag was the sum of the product of Ti and Li. This total lag was estimated at 4.3 months and 5.7 months, depending on whether social security taxes were included. Using these total lags in conjunction with the change in the monthly rate of inflation between 1974 and 1975, it was shown that much of the sharp fall in revenue over those years could be attributed to the acceleration of inflation in conjunction with the lag in collection. /// Les ouvrages qui traitent de l'incidence de l'inflation sur les recettes fiscales prennent comme point de départ deux hypothèses, à savoir, 1) que les impôts sont payés au fur et à mesure qu'ils échoient et 2) que les régimes fiscaux sont généralement élastiques. Lorsque ces deux hypothèses sont valides, l'inflation aboutit normalement à un accroissement des recettes fiscales réelles. Par contre, lorsqu'elles ne le sont pas -- c'est-à -dire lorsqu'un pays se caractérise par des retards substantiels dans le recouvrement de l'impôt ou lorsque son régime fiscal a une élasticité proche de l'unité -- les conséquences de l'inflation peuvent être très différentes. Cette situation s'applique à la plupart des pays en développement et peut même s'appliquer à quelques pays industrialisés. Le présent article analyse le problème des retards de recouvrement dans un cadre théorique qui est ultérieurement utilisé pour expliquer le comportement des recettes pendant la récente période d'inflation en Argentine. La partie théorique montre comment les retards de paiements et les taux d'inflation se conjuguent pour influer sur les recettes fiscales réelles. Dans l'hypothèse où le régime fiscal a une élasticité qui n'est pas trop éloignée de l'unité, il est possible de mettre au point une matrice qui montre dans quelle mesure les recettes réelles diminuent lorsque l'inflation (par mois) augmente à un certain rythme et lorsque le retard moyen (en mois) a une valeur donnée. La matrice montre aussi le gain des recettes réelles lié à une diminution donnée de la durée du retard de recouvrement. De plus, une annexe mathématique montre comment le retard et le taux d'inflation sont liés à l'élasticité du régime fiscal. L'auteur applique enfin cette analyse au cas de l'Argentine. Définissant Ti comme étant la part du total des recettes fiscales de 1974 engendré par un impôt (ou groupe d'impôts) particulier, et Li comme étant le décalage entre la date de l'échéance de l'impôt et celle du paiement effectif, il conclut que le décalage est la somme du produit de Ti et Li. Ce décalage total a été estimé à 4,3 mois et 5,7 mois, selon que les cotisations à la sécurité sociale sont incluses ou non. Utilisant ces décalages de concert avec la variation du taux mensuel d'inflation entre 1974 et 1975, il montre que la baisse brutale des recettes au cours de ces années peut être en grande partie attribuée à l'accélération de l'inflation et au retard de recouvrement. /// Las obras que se ocupan del impacto de la inflación sobre los ingresos tributarios hacen el supuesto de que se cumplen dos condiciones: 1) que los impuestos se pagan en el momento en que se devengan y 2) que los sistemas tributarios son generalmente elásticos. Cuando son válidos estos dos supuestos, lo probable es que la inflación ocasione aumentos en los ingresos tributarios reales. Por otra parte, cuando no se cumplen dichos supuestos --es decir, cuando un país se caracteriza por grandes desfases en la recaudación de los impuestos o cuando su sistema tributario tiene una elasticidad cercana a la unidad-- las consecuencias de la inflación pueden ser muy distintas. Esta diferente situación se aplica a la mayoría de los países en desarrollo y puede incluso aplicarse a algunos países industriales. En el presente artículo, el problema de los desfases en la recaudación se analiza en un marco teórico que se utiliza posteriormente para explicar el comportamiento de los ingresos públicos durante la reciente inflación en Argentina. La parte teórica indica la forma en que los desfases en los pagos y las tasas de inflación se interrelacionan para afectar a los ingresos tributarios reales. Suponiendo que el sistema tributario tenga una elasticidad no muy distinta de la unidad, puede formarse una matriz que indique la cuantía de la disminución del ingreso real al aumentar la inflación (mensual) en una cantidad determinada, teniendo el desfase medio (en meses) un valor dado. La matriz indica tabién el aumento de ingresos reales que va unido con una determinada disminución en la longitud del desfase de recaudación. Se presenta, además, un apéndice matemático en el que se indica la forma en que están interrelacionados el desfase y la tasa de inflación con la elasticidad del sistema tributario. Por último, se aplica a Argentina el mencionado análisis. Definiendo Ti como la proporción de los ingresos tributarios totales generados en 1974 por un determinado impuesto (o grupo de impuestos), y Li como el desfase entre el momento en que se origina la obligación de pagar dicho impuesto y el momento en que efectivamente se efectuó el pago, el desfase total del sistema tributario es la suma del producto de Ti y Li. Este desfase total se estimó en 4,3 meses y 5,7 meses, según que se incluyeran los impuestos de la seguridad social. Utilizando dichos desfases totales junto con la variación en la tasa mensual de inflación entre 1974 y 1975, se demuestra que gran parte de la fuerte disminución en los ingresos durante dichos años puede atribuirse a la aceleración de la inflación junto con el desfase de recaudación.

Suggested Citation

  • Vito Tanzi, 1977. "Inflation, Lags in Collection, and the Real Value of Tax Revenue (L'inflation, les retards de recouvrement et la valeur réelle des recettes fiscales) (Inflación, desfases en la recaudación y valor ," IMF Staff Papers, Palgrave Macmillan, vol. 24(1), pages 154-167, March.
  • Handle: RePEc:pal:imfstp:v:24:y:1977:i:1:p:154-167
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    Citations

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    Cited by:

    1. Carlos A. Végh Gramont, 1991. "Stopping High Inflation; An Analytical Overview," IMF Working Papers 91/107, International Monetary Fund.
    2. Espinosa-Vega, Marco A & Yip, Chong K, 1999. "Fiscal and Monetary Policy Interactions in an Endogenous Growth Model with Financial Intermediaries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 595-615, August.
    3. Roque Fernández, 1989. "Institucionalidad Económica y Estabilidad Política," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 26(78), pages 169-176.
    4. Tallman, Ellis W. & Wang, Ping, 1995. "Money demand and the relative price of capital goods in hyperinflations," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 375-404, November.
    5. Maxwell J. Fry, 1981. "Inflation and economic growth in Pacific Basin developing economies," Economic Review, Federal Reserve Bank of San Francisco, issue Fall, pages 8-18.
    6. Albuquerque, Pedro H. & Gouvea, Solange, 2009. "Canaries and vultures: A quantitative history of monetary mismanagement in Brazil," Journal of International Money and Finance, Elsevier, vol. 28(3), pages 479-495, April.
    7. Ruge-Murcia, Francisco J., 1999. "Government expenditure and the dynamics of high inflation," Journal of Development Economics, Elsevier, vol. 58(2), pages 333-358, April.
    8. Fischer, Stanley, 1989. "The economics of the government budget constraint," Policy Research Working Paper Series 224, The World Bank.
    9. Wolf, Holger C., 2001. "Inflation and stabilization in Latvia: 1918-1922," Economic Systems, Elsevier, vol. 25(1), pages 33-50, March.
    10. Holger C. Wolf, 1993. "Anti-Tax Revolutions and Symbolic Prosecutions," NBER Working Papers 4337, National Bureau of Economic Research, Inc.
    11. Patrick Honohan, 1994. "The Fiscal Approach to Financial Intermediation Policy," Papers WP049, Economic and Social Research Institute (ESRI).
    12. Edwards, Sebastian & Tabellini, Guido, 1991. "The political economy of fiscal policy and inflation in developing countries : an empirical analysis," Policy Research Working Paper Series 703, The World Bank.
    13. Rogers, John H. & Wang, Ping, 1995. "Output, inflation, and stabilization in a small open economy: Evidence from Mexico," Journal of Development Economics, Elsevier, vol. 46(2), pages 271-293, April.
    14. Nowotny, Ewald, 1980. "Inflation and Taxation: Reviewing the Macroeconomic Issues," Journal of Economic Literature, American Economic Association, vol. 18(3), pages 1025-1049, September.
    15. Caballe, Jordi & Panades, Judith, 2004. "Inflation, tax evasion, and the distribution of consumption," Journal of Macroeconomics, Elsevier, vol. 26(4), pages 567-595, December.
    16. Thorne, Alfredo E. & Dastgheib, Azita, 1992. "Public sector debt, fiscal deficits, and economic adjustment : a comparative study of six EMENA countries," Policy Research Working Paper Series 840, The World Bank.

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