Revenue Buoyancy and its Fiscal Policy Implications

Posted: 1 Jun 2010

See all articles by Isabelle Joumard

Isabelle Joumard

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Christophe Andre

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Date Written: May 31, 2010

Abstract

Tax receipts surged between 2005 and 2007 in many OECD countries, resulting in significant improvements in headline fiscal positions. As a consequence, pressures for tax cuts and for public spending increases have emerged. In the past, responding to such demands has permanently weakened budget positions as revenue windfalls ultimately proved to be temporary. Hence, the opportunity to address structural deficit problems and prepare for future demographic trends has been lost, and the ability to respond to subsequent cyclical downturns has been weakened. This paper provides an analysis of the factors behind recent revenue buoyancy and examines past responses to unexpected revenue gains. It also discusses whether improved information on fiscal positions and future fiscal challenges, combined with relevant fiscal rules, might help in avoiding a repetition of past errors in fiscal policy.

Keywords: Fiscal Policy, Windfall Tax Revenues, Fiscal Rules

JEL Classification: H2, H3, H6, H62

Suggested Citation

Joumard, Isabelle and Andre, Christophe, Revenue Buoyancy and its Fiscal Policy Implications (May 31, 2010). Available at SSRN: https://ssrn.com/abstract=1618205

Isabelle Joumard

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

Christophe Andre (Contact Author)

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

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