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The Vat Laffer Curve And The Business Cycle

Listed author(s):
  • Francisca Guedes de Oliveira

    ()

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

  • Leonardo Costa

    ()

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

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.

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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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Paper provided by Católica Porto Business School, Universidade Católica Portuguesa in its series Working Papers de Economia (Economics Working Papers) with number 02.

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Length: 16 pages
Date of creation: Sep 2013
Handle: RePEc:cap:wpaper:022013
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  1. repec:aei:rpaper:25839 is not listed on IDEAS
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  10. Carlos A. Vegh & Guillermo Vuletin, 2015. "How Is Tax Policy Conducted over the Business Cycle?," American Economic Journal: Economic Policy, American Economic Association, vol. 7(3), pages 327-370, August.
  11. Basil Dalamagas, 1998. "Endogenous growth and the dynamic Laffer curve," Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 63-75.
  12. Deyak, Timothy A & Sawyer, W Charles & Sprinkle, Richard L, 1989. "An Empirical Examination of the Structural Stability of Disaggregated U.S. Import Demand," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 337-341, May.
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  14. Kent Matthews, 2003. "VAT Evasion and VAT Avoidance: Is there a European Laffer curve for VAT?," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(1), pages 105-114.
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