Estimating Dynamic Tax Revenue Elasticities for Germany

56 Pages Posted: 21 Jun 2016

See all articles by Gerrit Koester

Gerrit Koester

European Central Bank (ECB)

Christoph Priesmeier

Deutsche Bundesbank

Date Written: 2012

Abstract

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

Suggested Citation

Koester, Gerrit B. and Priesmeier, Christoph, Estimating Dynamic Tax Revenue Elasticities for Germany (2012). Bundesbank Discussion Paper No. 23/2012, Available at SSRN: https://ssrn.com/abstract=2796877

Gerrit B. Koester

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Christoph Priesmeier (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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