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The Vat Laffer Curve And The Business Cycle

Author

Listed:
  • Francisca Guedes de Oliveira

    () (Faculdade de Economia e Gestão - Universidade Católica Portuguesa, Porto)

  • Leonardo Costa

    () (Faculdade de Economia e Gestão - Universidade Católica Portuguesa, Porto)

Abstract

A VAT Laffer Curve is estimated for the EU-27 countries in the period 2000-2010. Results show that countries such as Portugal are already in the prohibitive range of the curve. Structural differences exist between low growth years and high growth years. Collected VAT revenue is smaller in low growth years than in high growth years, which illustrates the existence of a VAT automatic stabilizer effect. The VAT rate that maximizes VAT revenue is slightly higher in low growth years, which can be explained by changes in the structure of consumption and of VAT collection enforcement. A procyclical VAT rate policy increases the underlying business cycle volatility and may also have as an outcome the increase of overall government intertemporal collected VATR.

Suggested Citation

  • Francisca Guedes de Oliveira & Leonardo Costa, 2013. "The Vat Laffer Curve And The Business Cycle," Working Papers de Economia (Economics Working Papers) 02, Católica Porto Business School, Universidade Católica Portuguesa.
    • Handle: RePEc:cap:wpaper:022013
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    File URL: http://www.feg.porto.ucp.pt/docentes/repec/WP/022013-Oliveira_Costa-EU_Laffer_Curve.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Stanisław Cichocki & Ryszard Kokoszczyński, 2016. "The evolution of the Laffer curve as a framework for studying tax evasion: from simple theoretical to DSGE models," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 45.
    2. repec:zbw:espost:170564 is not listed on IDEAS
    3. Vasilev, Aleksandar, 2016. "Is consumption-Laffer curve hump-shaped? The role of VAT evasion," EconStor Preprints 147001, ZBW - German National Library of Economics.

    More about this item

    Keywords

    VAT Laffer Curve; EU-27; Portugal; Business Cycle;

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