Tax Buoyancy

Abstract

This study investigates the tax buoyancy effects in VAT, corporate income tax (CIT) and personal income tax (PIT) revenue in Greece based on previous IMF and OECD studies. The paper finds that the implied estimated elasticity of VAT, PIT and CIT revenue to GDP will be 1.2-1.3, 1.7-1.9 and 1.2-1.3, respectively in the period 2014-2016. Using these elasticities, the OECD elasticities of excise taxes, social security contributions and property taxes to GDP computed by Belinga et al. (2014), as well as the share of each revenue category to total revenue we find that the implied elasticity of tax revenue to GDP is 1.06 in the short run and 1.22 in the long run in Greece. These findings imply that the tax buoyancy effects are larger than those estimated by Belinga et al (i.e. 0.89 in the short run and 1.09 in the long run).

Keywords: tax buoyancy,elasticity, VAT, CIT, PIT

JEL Classification: E62, H24, H25, H30