Estimating Dynamic Tax Revenue Elasticities for Germany
56 Pages Posted: 21 Jun 2016
Date Written: 2012
We analyse tax revenue elasticities by applying dynamic models to a new disaggregated dataset for Germany, which is adjusted for the effects of tax reforms. We estimate long-run elasticities that are substantially lower than in comparable studies for profit-related taxes and are slightly lower for value-added taxes, whereas the long-run elasticity for wage taxes is close to the consensus estimate in the literature. Additionally, we find that differences between short- and long-run elasticities are particularly important with respect to profit-related taxes. Here we estimate a far lower contemporaneous response to tax base changes than other studies and a dynamic reaction pattern spanning several years, which can be explained, for example, by tax collection lags.
Keywords: Dynamic tax revenue elasticities, Disaggregated analysis, Error correction models
JEL Classification: H2, H24, H25, E26
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