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Assessing the Variability of Tax Elasticities in Lithuania

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  • Tigran Poghosyan

Abstract

This paper quantifies the variability of tax elasticities in Lithuania using two alternative methods: rolling regressions and pooled mean group estimator. The analysis is motivated by the systematic variation of tax revenues observed over the economic cycle in the recent past. Both methods confirm that tax elasticities moved with the cycle, which can be attributed to the procyclical tax compliance tendencies and structural composition effects across tax bases. Comparison of VAT revenue gaps across Baltic countries during the recent recovery suggests that tax revenues rebounded fastest in Estonia, followed by Lithuania and Latvia. Overall, the results of the study emphasize the importance of accounting for cyclical variation in tax elasticities when making short-term tax revenue projections.

Suggested Citation

  • Tigran Poghosyan, 2011. "Assessing the Variability of Tax Elasticities in Lithuania," IMF Working Papers 11/270, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/270
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    References listed on IDEAS

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    1. European Commission, 2013. "Taxation trends in the European Union: 2013 edition," Taxation trends 2013, Directorate General Taxation and Customs Union, European Commission.
    2. Burcu Aydin, 2010. "Cyclicality of Revenue and Structural Balances in South Africa," IMF Working Papers 10/216, International Monetary Fund.
    3. Agha, Ali & Haughton, Jonathan, 1996. "Designing VAT Systems: Some Efficiency Considerations," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 303-308, May.
    4. Luiz de Mello, 2009. "Avoiding the Value Added Tax," Public Finance Review, , vol. 37(1), pages 27-46, January.
    5. European Commission, 2011. "Taxation trends in the European Union: 2011 edition," Taxation trends 2011, Directorate General Taxation and Customs Union, European Commission.
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    Citations

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    Cited by:

    1. Stavros Degiannakis & Timotheos Angelidis & George Filis, 2013. "Oil price shocks and volatility do predict stock market regimes," Working Papers 170, Bank of Greece.
    2. Maria Th. Kasselaki & Athanasios O. Tagkalakis, 2016. "Fiscal policy and private investment in Greece," International Economics, CEPII research center, issue 147, pages 53-106.
    3. Athanasios O. Tagkalakis, 2014. "The determinants of vat revenue efficiency: recent evidence from Greece," Working Papers 181, Bank of Greece.
    4. Athanasios O. Tagkalakis, 2013. "Assessing the variability of indirect tax elasticity in Greece," Economics Bulletin, AccessEcon, vol. 33(3), pages 2098-2109.
    5. Athanasios O. Tagkalakis, 2014. "Is there any evidence of VAT related buoyancy effects in Greece?," Economics Bulletin, AccessEcon, vol. 34(3), pages 1762-1775.

    More about this item

    Keywords

    Economic cycles; Lithuania; Tax elasticity; tax revenues; tax compliance; tax system; Multiple or Simultaneous Equation Models: Time-Series Models;

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