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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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    References listed on IDEAS

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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. Aleksandar Vasilev, 2018. "Is consumption-Laffer curve hump-shaped? The VAT evasion channel," Journal of Economic Studies, Emerald Group Publishing, vol. 45(3), pages 598-609, August.
    3. Alexandra Ferreira‐Lopes & Luís Filipe Martins & Ruben Espanhol, 2020. "The relationship between tax rates and tax revenues in eurozone member countries ‐ exploring the Laffer curve," Bulletin of Economic Research, Wiley Blackwell, vol. 72(2), pages 121-145, April.
    4. Juan Pablo, Herrera Saavedra & Juan Camilo, Villar Otálora & Jacobo, Campo Robledo, 2020. "Tributación en Colombia: Una aproximación teórica y empírica de la Curva de Laffer [Taxes in Colombia: A theoretical and empirical approach to the Laffer Curve]," MPRA Paper 105405, University Library of Munich, Germany.
    5. Juan Pablo Herrera Saavedra & Juan Camilo Villar Otálora & Jacobo Campo Robledo, 2020. "Tributación en Colombia: Una aproximación teórica y empírica de la Curva de Laffer," Estudios Económicos SIC 018601, Superintendencia de Industria y Comercio.
    6. Vasilev, Aleksandar, 2016. "Is consumption-Laffer curve hump-shaped? The role of VAT evasion," EconStor Preprints 147001, ZBW - Leibniz Information Centre for Economics.

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    Keywords

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